For many people, investing in stocks is the same as gambling. But when you put your money in the markets, the house doesn’t always win. In fact, the vast majority of people make money when they invest sensibly.
Right now might be the best time to invest in stocks for the foreseeable future. That’s because a unique set of circumstances are coming together. Read on to learn more.
Inflation May Be Subsiding
Markets get jittery when inflation is high. That’s because central banks put up interest rates, making other investments, such as bonds, more attractive. Higher interest rates also make company debt more expensive, with interest payments cutting into profits.
However, in July many countries, including the US, reported declines in the headline rate of inflation. These were modest, so markets didn’t react a great deal. But it could be a sign that we’re at a turning point, particularly since wages have been lagging behind the consumer price index.
If there is lower inflation in August, that makes it even less likely that rates will skyrocket going forward, and that’s ultra-bullish for the stock market.
Deflation May Be On The Way
Though it’s hard to imagine right now, we may actually be on the verge of a deflationary episode. And, again, that’s good for stocks. It promises lower interest rates to stimulate demand and it could also spur a movement away from bonds into the stock market.
Deflation is a real risk because of underlying changes in the economy. Technology is likely to improve dramatically over the next ten years, making it considerably cheaper to produce things. And the globally aging population will reduce demand, forcing many producers to lower their prices to attract customers.
Many Top Names Are Selling For Bargain Prices
Just eye-balling GOOG and AAPL quotes, you can see that many top names in the Fortune 500 list are selling for bargains right now. You can pick up companies at prices that would have been virtually impossible just twelve months ago.
That’s because investors are terrified about the markets and world situation at the moment. They see disaster in every quarter, from wars to new pandemics to inflation to recession. Everything is weighing on their minds. Yet, if you look at the performance of the underlying economy, it’s okay. Growth is still going strong and people are in work. We’re not in a 1970s-style situation just yet.
Pricing In War Risk Doesn’t Make Sense
Lastly, many analysts are pricing in war risk. But if a war was to happen and major western and eastern countries clashed, it would mean the end of the world as we know it. The stock market would be the least of people’s concerns. It’s not the sort of thing that you can hedge against, especially with financial instruments.
During the Cold War, the value of stocks continued to grow enormously. People made a lot of money, despite the threat of impending doom. The same is likely to happen this time around, even as international tensions rise considerably.