Editor's note: The good times are returning...

The COVID-19 pandemic sent shock waves throughout the market that eventually resulted in a tumultuous 2022. The downtrend finally reversed this year, resulting in the broad market completing one of the best first-half performances of this century. But some folks are still reluctant to put their money to work due to lingering fears from the pandemic...

That's why True Wealth editor Brett Eversole believes it's critical for investors to understand why sitting on the sidelines right now will cause you to miss out on huge gains moving forward.

In today's Masters Series, originally from the January issue of True Wealth, Brett talks about the lasting impact of the pandemic... details how it opened the door for today's rampant inflation... and explains why investors should be optimistic right now amid this ongoing market turmoil... 

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The Pandemic 'Aftershock' Is Ending... And We're Buying

By Brett Eversole, editor, True Wealth

At 4:35 a.m., a massive earthquake shook the South Island of New Zealand.

The quake – which struck on September 4, 2010 – clocked in at a magnitude of 7.1. It was one of New Zealand's strongest earthquakes on record... And the epicenter was just 25 miles west of Christchurch, the country's second-most-populous city at the time.

The tremors lasted up to 40 seconds. They caused power outages and plenty of damage. But incredibly, only two people died, while two others were seriously injured.

Somehow, Christchurch, a city of several hundred thousand people, managed to avoid the worst possible outcome...

Unfortunately, that didn't last.

Aftershocks began almost immediately. And they were relentless... more than 11,000 hammered the city in the months that followed.

The first major aftershock was just four days later, when a 5.1 magnitude earthquake came much closer to Christchurch's center. It didn't cause much damage.

Instead, the worst happened on February 22, 2011... when a 6.3 magnitude earthquake struck just four miles from the city's business district.

By then, the months of aftershocks had weakened the city's infrastructure. Christchurch was vulnerable. And the result was catastrophic...

Buildings collapsed. Debris crushed cars and buses. And damage to roads and bridges meant that rescue workers struggled to get to the scene. A total of 185 people lost their lives.

That aftershock alone caused more than $15 billion in damages. At the time, it was one of the most expensive insured-loss events since 1980.

In seismology, Bath's law states that the magnitude of the largest aftershock will be roughly 1.2 less than the main earthquake. But this glosses over an important point... The damage from the aftershock can be much worse than the initial earthquake.

Christchurch experienced that firsthand. It was so bad, people simply got up and left. The city's population declined by tens of thousands. It took years for the area to fully recover.

This principle happens outside of earthquakes as well: The second, less extreme event is often what inflicts the most pain. And that's exactly what's happening in the economy today...

We're living through a financial aftershock.

When the COVID-19 pandemic hit the markets, that was the earthquake. Everything changed. We shut down the global economy and pumped trillions of dollars into the system.

Today, more than three years after it began, we're still feeling the tremors.

That's why stocks, bonds, and just about everything else had a terrible year in 2022. The downstream effects of the pandemic and how we dealt with it led to more financial pain than the initial 2020 crash.

Last year was the aftershock. But there's good news... Even the worst aftershock doesn't last forever. And the biggest problem of 2022 – the one that caused the most financial pain – is finally behind us.

This has massive ramifications. The losses most investors experienced in 2022 are in the past... And the good times from before the pandemic are returning.

Simply put, the issue that caused financial calamity in 2022 ended in 2023. And that led to the stock market completing its second-strongest first-half performance this century.

But just when it seemed like the pain was over, storm clouds started shrouding the horizon...

Investors felt like the world was ending in June 2020. The pandemic had shut down the global economy just a few months prior. Life as we knew it was over. And the news was getting worse by the day...

Global COVID-19 infections had jumped to more than 100,000 new cases daily. Deaths had surged to more than 5,000 a day. Even lockdowns and travel restrictions seemed to be doing little to slow the virus.

No one knew when a vaccine might be ready. At the time, it seemed like it could be years away, not months.

Yet despite how bad things were, the financial markets were booming...

The pandemic had caused a 34% stock market decline in only a month. But by June – just two and a half months later – stocks had recovered nearly all of their losses.

One of the fastest bear markets on record was over... And the bull market was back in full force.

For a time, it seemed like we'd really made it through the worst of the damage. Vaccines came out. We began to see fewer and less-deadly infections. The Federal Reserve and government stimulus papered over the financial problems for a time as well.

In short, we experienced a crazy historic event. Things could have gone much worse... Millions more could have died. We could have suffered through a second Great Depression.

Instead, life started to get back to normal. Investors began living in a world where they could buy just about anything and make money. People finally breathed a sigh of relief.

Then came the financial aftershock...

You see, folks have been worrying about a specific kind of disaster since the global financial crisis. But it never showed up until the pandemic weakened our economy.

I'm talking about inflation.

Years of "easy money" set the stage. Then, the economic shutdown in 2020 disrupted the global supply chain. The result was too much money chasing too few goods. And as any Economics 101 class will tell you, that's a classic inflation setup.

At a glance, this aftershock might not seem so extreme... It's purely economic. It's not going to kill anyone, unlike the virus. And it's something we've dealt with in our lifetimes before. You can't say the same for a global pandemic.

But the reality is that, at least economically, the pandemic made us vulnerable... And its inflation aftershock was more painful to the economy than the initial catastrophe.

It caused one of the most tumultuous years for financial assets in history. The Fed was forced to hike interest rates to get inflation under control. And global stocks and bonds lost more than $30 trillion last year as a result.

Now, inflation is still nowhere near the Fed's 2% target rate. Investors expect another aftershock, with even worse consequences.

They're dead wrong...

The pandemic aftershock is nearly over. Inflation isn't preventing folks from putting their money to work right now. And that means the Fed will be able to ease up on its rate-hiking venture.

I can't overstate how important this is. Nearly every financial problem from 2022 stems from the spike we've seen in interest rates. It caused...

• The stock market sell-off

• The bond market crash (as high rates drove prices down)

• The housing slowdown (as mortgage rates roughly doubled)

• The slowdown in foreign economies (as the U.S. dollar soared in value)

It all comes back to the Fed... and its efforts to tame inflation.

This isn't a new concept, though. We know why the Fed has been acting against the market. And that's also why we know the hits won't keep coming.

While the Fed may have been cheering for losses and a slowing economy in 2022... it's close to changing course. That means the good times in the market – like we saw before the inflation aftershock – are about to return...

Good investing,

Brett Eversole

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Editor's note: This recovery from the pandemic aftershock isn't the only important upcoming event in the market right now. That's why Brett recently joined forces with The McCall Report editor Matt McCall for an urgent briefing to talk about what's coming next...

They revealed a new bull market prediction that could be bigger than the technology stock frenzy we've seen so far this year. They believe they've found the next group of stocks poised to rally. Click here to watch the full replay...