Despite showing a drop of more than 23% in the year 2022, the consensus is growing that the worst is not over for the American stock market. The positive evolution of the American stock market in the last decade made investors believe that any drop would already be a reason to buy. I explain below the risk you run if you think this way.
I spoke this Wednesday afternoon with the strategist, Rodrigo Melo, from the manager Asa Investimentos.
According to the manager’s analysis, the main American stock index, the S&P500 could still fall below 3,000 points.
The S&P500 is trading today at 3,665 points. A drop to just 3,000 points would mean a devaluation of more than 18%.
The reader of this column knows that this fall is nothing new. I warned readers to be careful with investing in the American stock exchange in October and November 2021. Again, in this year 2022, I made alerts in January, June, July and August.
As I wrote in June, as bad as the fall is the deadline for the stock market to return to previous levels. This is because the current opportunity cost is very high.
We have a prime rate of over 13.5% per annum. Therefore, two years of no return cost almost 30% of economic loss.
In another meeting this past Tuesday, Morgan Stanley strategist Cyril Moullé also warned that the S&P500 could fall more than 15%. Additionally, he suggested that the current moment would be more comparable to that of 2001 when the recovery took years.
The reasons for the expectation of devaluation are already known: high interest rates in the US, recession in the US and Europe and review of corporate profits.
One might ask at this point: but what is Warren Buffett doing?
It is necessary to differentiate Buffett’s condition from yours. He runs a kind of stock fund. In theory, it should be 100% long, but its cash position is around 20% of the total volume.
Another point to consider is the investment horizon. Buffett controls a stock investment company. Therefore, its horizon is indeterminate. He will always be long in stocks. However, your investment horizon is possibly shorter.
Lastly, Buffett doesn’t have the low-risk, high-return investment alternative like the CDI.
Therefore, carefully assess your risk exposure to the US market. Review your investor profile and investment horizon to adjust exposure and not suffer from possible further declines in the index.
Michael Viriato is an investment advisor and founding partner of Investor’s House
Follow and like De Grão em Grão on social media. Follow the lessons of investing in the Instagram.
If you have any questions or suggestions for themes, please feel free to send by email.
Chad-98Weaver, a distinguished author at NewsBulletin247, excels in the craft of article writing. With a keen eye for detail and a penchant for storytelling, Chad delivers informative and engaging content that resonates with readers across various subjects. His contributions are a testament to his dedication and expertise in the field of journalism.
