When will the stock market go up again?

Global stock markets have been falling for a while now. So when are they going to rise again? Edward Sheldon takes a look.

2022 has been a tough year for investors because share prices have generally been trending down. As a result, many people are asking the same question: ‘When will the stock market go up again?

Unfortunately, the reality of the situation is that no one knows exactly when shares will rise again. That’s because short-term stock market movements are notoriously hard to predict.

However, my own take here is that the market will rise again when several things happen. Here’s what I think needs to occur before stocks can resume their upward trend.

So when will shares rebound?

For markets to go up again, the first thing we need to see is inflation start to come down. Right now, inflation is at sky-high levels (around 9% both in the UK and the US) and this is creating all kinds of problems.

Not only is it negatively impacting company profits (which, in turn, is hitting share prices), it’s also impacting consumer spending (which is impacting company revenues). Until inflation comes down substantially, I think equity markets will be volatile.

We also need to see investors regain confidence in the US Federal Reserve. Many keep a close eye on the Fed (whose goal is to keep inflation in the US at a moderate level) because its decisions influence the economy and the financial markets.

With inflation at 9% however, a lot of people believe the central bank has lost control, and this is spooking investors. If the Fed can show it has the tools to deal with inflation, sentiment towards stocks could improve.

An end to the Russia-Ukraine crisis would also be helpful for shares. Right now, this is having a massive impact on energy prices and supply chains – both of which are fuelling inflation.

Additionally, we need to either avoid a recession or, if we do see one, show we are on the way out of it. The big question here is whether the world’s central banks can engineer a ‘soft landing’ and raise interest rates without sending the world into a recession.

Finally, we need to see less profit warnings and downward earnings revisions. At the moment, lots of companies are releasing the former. Meanwhile, many analysts are downgrading their earnings forecasts for companies. This is putting downward pressure on share prices.

So, overall, there’s a lot that needs to happen before markets can enjoy a sustained rally again, in my view.

I’m still buying stocks today

Having said that, this doesn’t mean it’s not a good time for me to invest. At some stage the market will rise again and, when it does, the rebound could be violent. I wouldn’t want to be on the sidelines when stocks start to rally, because the market could easily rise 10%+ in a flash.

If I wasn’t invested, I could potentially miss out on big gains.

It’s also worth pointing out that, while the market could go sideways for a while, there are always going to be opportunities for stock pickers like myself. A good example here is Shell. While the FTSE 100 has declined over the last year, its share price has risen more than 40%.

So while there’s a lot of uncertainty right now, I’m going to stick to my investment strategy and keep buying stocks for my portfolio.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Female analyst sat at desk looking at pie charts on paper
Investing Articles

Is now the time to be snapping up Rolls-Royce shares?

Rolls-Royce shares have faced numerous setbacks in the recent past. However, could now be the time to buy? This Fool…

Read more »

Investing Articles

Here’s why GSK and Haleon shares have tanked this week

Shares in both GSK and its spin-off Haleon have plummeted this week. Edward Sheldon looks at what's going on and…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

My Aviva shares leapt 17%. Should I sell or buy more?

Aviva shares have soared by a sixth since I bought them in late July. Should I sell after this sudden…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

Lloyds shares are down 20% since January. Should I sell or buy more?

Lloyds shares have fallen by almost a fifth since their 2022 peak of 56p in January. Having bought some at…

Read more »

Man changing battery on electric bicycle
Investing Articles

Is Elon Musk on the money about lithium shares?

With Elon Musk calling lithium mining a “license to print money”, should I be buying lithium shares now – or…

Read more »

Serious puzzled businessman looking at laptop
Investing Articles

Will Arrival stock hit $2 anytime soon?

Arrival stock has lost 80% of its value this year. With start of production imminent, can it stage a recovery…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

A top UK value stock to buy from the FTSE 250!

Stock market weakness has left many quality shares looking ultra cheap. I'm on the hunt for UK value stocks and…

Read more »

Elevated view over city of London skyline
Investing Articles

Can the tempting M&G dividend yield of 8%+ last?

The M&G dividend has increased again this week. But will it last in a challenging economic environment -- and should…

Read more »