Stocks are down. The “fear index” is up 50% in the past month. Inflation keeps waving a red flag in front of the Fed despite the highest interest rates in decades. A recession seems imminent. Earnings have already dropped across the S&P 500 even though stocks are expensive by historical standards. And with tension flaring overseas, Congress can’t pass laws or a budget.

You’d think money would be flooding out of the market. But while stocks have dropped 5% in the last 10 weeks, the S&P 500 is still holding 20% above where it was 12 months ago. Most of the serious investors remain firmly committed. They’re here for better days ahead and they have pretty good confidence that those days will be here almost before we know it.

That’s the critical thing here. While the world can look scary for long periods, success in the market means buying during the scary seasons and holding on through the recovery. We anticipate the coming cycle, skating ahead of the puck as they say in hockey . . . going where we know the puck is going.

So let’s conduct a thought experiment here. It’s mid-October. There are fewer than 80 days left in this year and then 2024 will roll in before we know it. By mid-February, we’ll be deep in another earnings season. The Fed will have gotten three more chances to twist the yield curve. And we’ll be 120 days out into the future.

What does the world look like then? Will it be better or worse than today?

Start with interest rates. According to the rate futures market, the Fed might follow through on its threats and lift the near end of the yield curve one more time. If it doesn’t happen in December, it will happen in January. But after that, nobody seriously thinks it will get worse.

If anything, the odds start stacking up that we’ll get a rate CUT as early as March. The pressure starts to ease from that moment, whenever it is. Assuming that we can survive that last tightening move for a few months, money starts getting cheaper from there. That’s a recipe for relief.

Economic growth, meanwhile, is probably going to slow to about 1.4% above inflation, which should be back down under 3% by that point. It’s going to feel like things are slowing down . . . but not much. And again, as price pressure recedes, it’s going to come as a relief.

But that might be when a recession starts. In that scenario, it might not even get called until late spring or even summer, by which point the downturn could already be over, at least according to projections from the Conference Board. In that scenario, it won’t be a deep or a prolonged contraction.

Maybe unemployment will be at 3.8% or 4.0% by then. That’s not disastrous. There’s no mass layoff cliff in those numbers. If that’s what happens, it means a reversion to the conditions we saw in 2017 through early 2019. Most people stay employed. They pay their bills. For the rest, unemployment helps to cover the gap while they search for their next job.

And corporate earnings will be booming on a year-over-year basis for the first time in ages. There’s no pandemic or huge stimulus to distort the numbers coming up. No tax cut. This is a reversion to “normal.” We’re looking for the kind of earnings growth that drives normal stock market returns: 8-11% a year without blowing out multiples.

Here’s where it gets interesting. The stock market generally bottoms out 5-9 months BEFORE the recession ends. If the next recession is over by May, the last chance to buy stocks on the dip might come before January. The window might already be closing.

In that scenario, investors who own stocks now and hold on will be in significantly better financial condition 120 days from now. Granted, that requires four months of patience and, more importantly, the ability to stay liquid enough to roll with the market’s punches in the meantime.

Like we say, the market stops being rational all the time. It swings into extremes of bubble-inflating greed and explosive fear. The trick is to remain liquid or at least patient long enough for the market to return to its senses, allow stocks to revert to their normal valuations and get back to work.

I’m thinking 120 days is not too long to wait. Most of us can endure a lot as long as we know it’s not forever. Think about the somewhat goofy recommendation that a lot of wealth managers make: “stay the course.” We have to stay the course even when the seas get stormy.

But they never tell you how long you need to wait for the storm to end. Let’s check back in 120 days. If the world doesn’t look like a better place by then, at least for shareholders, I’ll be surprised.