2022 - Poor Performance & a Year to Forget
When a market or an individual stock is performing poorly, it can be an opportunity for long-term investors to buy assets at a lower price. This is known as "buying low" which is an investment strategy that aims to purchase assets when they are undervalued and then hold them until their value increases. This approach is based on the idea that markets tend to be cyclical, meaning they go through periods of growth and decline. Therefore, by buying assets when they are undervalued during a period of poor performance, investors can potentially benefit from the market recovery when it occurs.
Additionally, during a period of poor performance, companies may be cutting costs and streamlining operations, which can make them more profitable in the long-term. This can lead to higher future earnings, which can drive the stock price higher. Furthermore, during a recessionary period, companies that are more resilient and well-positioned to weather the downturn may be more likely to emerge stronger when the economy recovers. This can also lead to higher stock prices in the future.
Another aspect is that during a recessionary period, the interest rates are likely to be reduced, which makes borrowing cheaper for companies, this is likely to increase the investment and spending in the economy, which can lead to higher economic growth and potentially higher stock prices.
It's important to note that investing in undervalued assets during a recessionary period can be a good way to take advantage of the market recovery, but it also comes with a higher degree of risk.
