Yes, we are in a rocky bear market. Now is not the time to sell stocks, Mason professor says

man with glasses and white shirt outside
Derek Horstmeyer. Photo by Creative Services

George Mason University School of Business finance professor Derek Horstmeyer said in a recent interview that investors should avoid selling stocks in a bear market like now. Here’s his perspective.

What is happening with inflation and the stock market right now?

We have what can be described as a double whammy right now: supply and demand issues simultaneously. We have major supply issues because of events in the world, like the war in Ukraine. At the same time, people are emerging from the pandemic and have pent-up demand from two years of staying home. Inflation goes up when supply gets contracted or when demand goes up, so having both at the same time means there will be high inflation.

In addition, we’re officially in a bear market. When the stock market is down 20% from its highs, that’s a bear market. The tech sector is doing even worse than that. It’s down around 30 to 35%. This is all due to rising interest rates. As interest rates go up, the present value of stocks will go down.

What can the government do to address inflation?

The main responsibility here is going to be with the Federal Reserve. Congress and the president can’t really do that much. They can address supply bottlenecks, but not much more than that. The Federal Reserve controls interest rates, and right now it is raising interest rates to cool off the economy and try to stop inflation. By cooling off the economy, people don’t spend as much or take on as much debt. At least, that’s the hope, but it can be difficult to cool off the economy without putting us in a recession. That’s what everyone is worried about right now. They are worried that the Fed will raise rates too quickly and put us in a recession. 

What should investors be doing in this current market?

It’s been a rocky four or five months to start the year. The Fed’s policy has thrown things in disarray, and we should expect another four months or so of a choppy market. Fundamentally, though, investors should not freak out and sell. You don’t want to sell when your stocks are down.

As for buying stocks, energy and materials companies have done well, but that may have run its course. With the market expecting a recession, people might want to go to defensive areas of the economy, like utilities or consumer staples, such as anything you can get in a supermarket or a dollar store. Walmart does well in a recession.

In fact, while everyone else is freaking out is generally a good time to buy many types of stocks at a discount. There’s an old adage, when there’s fire in the streets, that’s when you should buy real estate. I’m not sure how much lower the stock market can go, so in that sense, I’m feeling optimistic that after a few months, things will even themselves out.

Horstmeyer writes a monthly column for the Wall Street Journal on ETF and mutual fund performance. His research focuses on corporate finance and hedge fund activism issues.

He can be reached at

For more information, please contact Anna Stolley Persky at

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