Can you feel it?
There has been a shift in our economy – and it doesn’t take a tenured economy professor to see which direction that it’s headed.
Inflation…
Pandemic struggles…
Uncertainty with the Fed…
All the signs are there that we’re headed toward the end of the record bull market we’ve experienced since 2009 – and the emergence of the dreaded bear market.
While there are a bunch of doomsayers out there that are predicting economic ruin…
History shows us that simply isn’t the case – and those investors who shift their trading strategies tend to experience growth during economic downturns – you just need to know what to look for.
And that’s what I’m going to show you today…
How to shift your trading gears so you thrive and not just survive a bear market.
I have to admit… I can’t stand Negative Nancys…
In my humble opinion, life is too short to be unhappy. There’s always a bright side – and no matter where you are, you’re ON the bright side, because the truth is – things could always be worse.
I like to stay positive regardless of the hurdles thrown my way…
Sure, everybody has bouts of pessimism, but it’s the people who dwell there that really rub me the wrong way.
Your average Negative Nancys never have anything positive to say – it’s always one calamity or another – and if calamity isn’t befalling them now, one is about to.
I can’t live like that. I have to have hope.
Now, I can understand how that may confuse some of you…
I know I’ve been talking a LOT about the impending bear market lately, the current economic hardships, and the problems plaguing the global market – and that really doesn’t sound like a positive outlook.
However, it’s not because I’m being pessimistic – it’s more because I don’t want our readers getting caught with their pants down.
That’s not pessimism…that’s prudence.
One of my more endearing traits (or annoying, depending on how you look at it) is the fact that I try to look for the silver lining in all situations…and contrary to what you might think, there is actually a lot of silver surrounding the imminent economic downturn.
Now, what tends to happen in a bear market is pretty cut and dry. History shows us what to expect: Inflation soars, the Fed raises interest rates, prices begin to stabilize, growth reduces, the Fed starts lowering rates to promote growth, high-growth returns, and we’re back on the bull.
Wash, rinse, repeat.
The Fed has been very vocal about hiking interest rates, and as of this past week’s Fed meeting – it looks like March is when we’ll see it make the first move…
And when that happens, those high-growth speculative stocks tend to take a backseat to more asset-driven investments that have something tangible in which investors can put their faith.
It has been that way of it since the dawn of the stock market. So, in the spirit of being optimistic about the coming downturn, let’s take a look at some of the markets that are bound to get a boost from the elevated interest rates.
These could give us a few opportunities to thrive when the many are trying to hold onto every dollar they have.
It’s important to keep in mind that the Fed has had eight “hiking cycles” since 1975, and examining the way stocks have responded during each of these cycles gives us a glimpse of what to expect this year. If historical data is accurate, you may want to start looking at Europe…
Historically, European stocks have delivered returns while the Fed hikes rates, most notably during the first six months after the first hike, during which these stocks tend to jump 9% on average during that period.
Now, while American stocks don’t do too bad either, the fact is European stocks tend to trade at a 27% discount to their American counterparts, which is too much of a discount to ignore.
The next market? Value stocks.
With the implementation of rate hikes, the effect tends to close the gap in returns between the riskiest and least risky assets out there. Investors may sell off their riskier and most expensive stocks (which tend to be those high-growth stocks in the tech sector) and buy into the “safer bets” that are offering higher returns than they would during a bull.
Obviously, the hard part is finding those undervalued stocks–but it’s not as hard as you may think.
Lastly, we’re going to look into asset stocks.
Energy, real estate, and basic resources are traditionally the best sectors to be in when the Fed hikes – as these sectors could still be ripe with profits, especially in Europe, as the region’s interest rates are currently negative. Any rise could be positive for banks’ earnings.
We’ll just simply have to keep our eyes on it.
Now, all that said, I hope the takeaway from this is that we don’t need to be pessimistic during a bear market (which is NOT a sure thing) or economic downturn.
We merely need to shift our focus from short- to long-term assets that can at least return us some kind of profit rather than high-growth stocks that yo-yo and play with our emotions.
If you’re tired of stocks playing with your emotions – then you may want to let GorillaTrades help guide you…
Our system doesn’t need to worry about momentum or rumors – our recommendations come from hard data – giving us the best chance to profit.
Or, you could continue doing things on your own…
Either way, don’t lose faith in our ability to make money in the future – we’ll always have our opportunities – and GorillaTrades can always help you find them!
“We must shift our thinking away from short-term gain toward long-term investment and sustainability, and always have the next generations in mind with every decision we make.” – Deb Haaland