Editor's note: Stocks are entering a new cycle...

A cloud of uncertainty is hanging over the market – and investors are panicking. But Marc Chaikin, founder of our corporate affiliate Chaikin Analytics, says things might not be as bad as they seem...

Marc left retirement in the wake of the 2008 financial crisis. Now, he uses more than 50 years of Wall Street experience to "level the playing field" between everyday investors and the pros.

According to Marc, investors should navigate today's murky market waters carefully. But that doesn't mean they should give up, either...

In today's Masters Series – adapted from the March 16 and 17 editions of his free Chaikin PowerFeed e-letter – Marc examines the tough test stocks are facing... and explains why we could be closer to a bottom than most investors realize...

The 'Feel Good' Era Is Ending... Here's What Not to Do

By Marc Chaikin, founder, Chaikin Analytics

The Federal Reserve is raising the benchmark interest rate...

The central bank announced its decision last week. The first stage of the rate hike was small, only a quarter of a percent. But it means that the Fed is pressing the economic brake pedal.

Investors are looking up at a lot of storm clouds right now... The war in Ukraine remains on folks' minds. Roaring inflation here in the U.S. is spooking people, too. And in recent weeks, price spikes for oil and metals have added fuel to the fire.

The S&P 500 is down 5% since the beginning of the year. That's still just a few percentage points away from "correction" territory.

It's no surprise that the market is full of fear and uncertainty.

Today, I'd like to share a bit of context. And while I don't mean to push a "this time is different" narrative, you need to understand the current setup to avoid a classic investing mistake...

Simply put, now is not the time to try to "catch a falling knife."

According to CNBC, the S&P 500 has endured 29 corrections since 1946 – or roughly one every 2.5 years. These corrections have lasted an average of four months. And the average recovery time to a new high is also four months.

Of course, each market cycle is different. That's important...

The tech-heavy Nasdaq Composite Index and the Russell 2000 Index of small-cap stocks both entered bear market territory in recent weeks. Those two indexes have dropped roughly 12% and 15%, respectively, from their November 2021 highs.

And now, the markets as a whole are facing a tough test...

The bull market that began in March 2009 was interrupted by the nasty, COVID-19-induced, 33-day bear market two years ago. After that quick decline, the Fed pumped an immense amount of cash into the economy.

But with inflation raging, the "feel good" era is coming to an end.

At its meeting last week, the Federal Open Market Committee boosted the federal-funds rate for the first time since 2018. From here, the Fed intends to raise rates at each of its six remaining meetings this year... and three more times in 2023.

With everything going on, one thing is clear – the Fed is in uncharted waters today.

The economy isn't flying right. You don't have to be an analyst to understand that.

Despite that, the Fed feels that it must fight inflation. So it's raising rates... even with the economic sanctions on Russia, which are likely to trigger unintended consequences in the world's financial markets.

So in short, as I said, now is not the time to try to catch a falling knife.

Instead, be patient. Take a deep breath. Follow your stops. And seek out investment opportunities that have the potential to outperform in this volatile environment.

Plus, keep in mind... we're in a midterm election year. And if history proves right, things are going to get worse before they get better.

The average peak-to-trough pullback in midterm election years over the past century has been 17.4%. That's roughly nine percentage points worse than the current decline...

Again, the S&P 500 is near correction territory. Even after the recent rally, it's still down more than 8% from its January high.

And importantly, the corrections in these midterm election years typically last between three and four months. So the bottom line is that we likely haven't seen the lows yet.

As I said, we don't want to "catch a falling knife." But that doesn't mean it's time to give up.

You can still find opportunities in the markets today if you know where to look. Plus, the data around the midterm elections comes with a twist...

In fact, it might be setting us up for a serious bull run that will pull the market out of the current correction. And it could get the market back to making new highs before we know it.

It's time for a bit of midterm hope... You see, despite everything going on in the world, this type of pullback is normal in midterm election years.

Sure, things could get a little bit worse in the short term. But in years like this one over the past century, they haven't gotten too bad before turning around. And history shows that the stock market is up an average of 32% a year later.

We're also entering a period in mid-to-late March when stocks tend to bottom out on a short-term basis.

With that said, any rallies from the current level should be viewed as "contra" affairs. These rallies can be steep – in the 5% to 10% range, as we've seen recently.

But even after the recent rally, the S&P 500 is still below its longer-term trend. We're not out of the woods yet.

The takeaway is simple... After years of the market blindly marching up, we're in a new cycle. The world is full of uncertainty. Many folks aren't sure what they should do next.

That means now, more than ever, you need data to guide you. Throwing darts and hoping to get lucky isn't going to work anymore.

But on the positive side, history shows us that we're nearing a bottom. And astute investors can get ahead of the game with the right opportunities.

With the data at your side, now is the time to get out there and find them.

Good investing,

Marc Chaikin

Editor's note: As stocks swing wildly... inflation spikes... and fear rises... Marc says the decisions you make in the next 90 days could determine your wealth for years to come. That's why if you have any money in the markets now, you can't afford to ignore his latest warning...

On Wednesday, March 30, at 8 p.m. Eastern time, Marc will share the truth about what's really going on in the U.S. stock market – and the strange event that's sending some stocks plummeting and others soaring. Plus, he'll detail the precise corner of the market where he believes a wave of crashes is headed next. Reserve your spot for free right here.