Investors Urged to Buy 10% Stock Dips as 13% Oil Surge Raises Fed Hike Risk
Updated
Updated · The Motley Fool · Jul 19
Investors Urged to Buy 10% Stock Dips as 13% Oil Surge Raises Fed Hike Risk
3 articles · Updated · The Motley Fool · Jul 19
Summary
A 13% weekly jump in WTI and Brent crude through July 17 has heightened concern that inflation could push the Federal Reserve back to rate hikes, setting up a potential equity correction.
Across nine Fed tightening cycles in the past 40 years, the S&P 500 and Nasdaq typically fell 10% and 12% within three months of the first hike; in midterm years, average drawdowns deepened to 17% and 24%.
History still favors staying invested: after the S&P 500 first closed in correction territory over the past decade, it returned 18% over the next year and 40% over two years.
The Nasdaq showed a similar pattern, gaining 21% over one year and 39% over two years after its first correction close, even though several corrections later became bear markets.
JPMorgan said seven of the market's 10 best days in the past 20 years came within 15 days of the 10 worst, underscoring the risk of selling into volatility instead of buying the dip.