Is september an alarming bell or an opportunity for investors?

Most global markets have been trading in the red zone following the weak trading sessions on Wall Street since last week.

Since the start of 2022, the market has been highly volatile, and the performance of wall street coupled with the opinion of the experts and the fund managers related to the possible recession have made market participants a little worried.

Several developments worldwide have contributed to the performance of various stock exchanges worldwide. Some of them include:

1.  Russia-Ukraine war

2.  Rising US inflation rate

3.  The slowdown in the Chinese economy

Because of the ongoing turbulence in the market, it is evident that many market participants are trying to protect their investments from losses. Many investors have started selling their holdings.

Factors creating fear amongst investors:

• On 30 August 2022, the US Bureau of Statistics provided a job opening and labour turnover summary for July 2022. Many investors perceive that higher-than-expected job openings in July 2022 indicate a further increase in the Fed’s ability to pursue the hawkish monetary policy. In July, job openings in the US increased to 11.2 million from 11.04 million in June 2022. People fear the Fed’s rising interest can impact the market sentiment across various stock exchanges.
• Renewed COVID-19 curbs, along with China’s weak economic data, are likely to impact market sentiment. Chinese manufacturing activities contracted for a second straight month in August 2022 due to COVID-19 lockdowns along with a steeping power shortage are affecting the country’s economic activity. Thus, impacting the allied businesses and sectors supporting China’s manufacturing activities. 
• Many fund managers expect markets to tumble by October. They expect the market to be bearish by October, contingent upon the level of the bounce in the dollar and US 10-year yields. When the US dollar and bond yield increases, it indicates that there could be tighter central bank liquidity. This situation is generally considered negative by the players in the market.

 Is it a recession?

While market participants fear a possible recession coming up, there is still no official confirmation from any official or government agencies. Although the economy has contracted over the previous two quarters, there is still no confirmation from the National Bureau of Economic Research related to a recession.

Is there a risk in selling your investments in these times?

While many investors have started selling off their holdings, there are still some investors who continue to hold their investments amid a turbulent market environment. Although there is a lot of projection related to the possible recession, still no official confirmation is there.

Undoubtedly, the stock market is highly unpredictable at this time. Hence, there is always a risk of losing money. Let us consider an example to understand this. You fear that the stock market may fall in the coming period, and you decide to sell your holdings. However, the stock market is volatile. Hence it could be possible that the stock market has gone up instead of falling. In such a case, you can lose those earnings.

Some expert advice to deal with the volatile market.

1.  One way to deal with volatility is to do nothing, one could hold the investment, ride out of the storm, and wait until the market is stable. In such a situation, technically, the investor may not lose       anything. There could be slight losses in the short run, but when the market recovers, the portfolio could regain value in the long run.

2.  One should check the stocks in the portfolio. In a situation where the market is volatile, a well-diversified portfolio helps to recover the situation in a better way. Suppose there are 20 stocks in the       portfolio. Even if two or three stocks cannot perform well, the remaining stocks can take care of the overall portfolio.

3. Choose stocks with solid fundamentals. Long term buy-and-hold investing still requires checking of corporate fundamentals. These stocks are believed to pull through the harsh economic times.

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