Weekly Brief: Always Look On The Bright Side Of Life

Weekly Brief: Always Look On The Bright Side Of Life

about 1 year ago4 mins

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2022 in 22 words: inflation ballooned and forced central banks to hike interest rates. Growth stocks nosedived, and recession fears climbed. But it wasn’t all bad.

🕰 Recap

  • Netflix was the first of the pandemic flyers to move to lower altitudes when it warned of tougher times ahead back in January
  • Inflation jitters turned to outright panic by the time the Federal Reserve (the Fed) dolled out its first jumbo hike in June
  • And despite signs that the red-hot inflation is cooling, chances are 2023’s going to have a recession of sorts

✍️ Connecting The Dots

You could flog yourselves with a review of 2022’s negative headlines if you want, but there’s another, more optimistic way to look back on this year. So let’s draw a line under the gloom for a moment, and don those rose-colored glasses…

Few places on the planet have been able to dodge inflation’s path, but it hasn’t been a big deal for everyone. Take Japan. The country’s been battling the destructive forces of deflation – that’s falling prices – for decades. So a little bit of inflation’s probably a welcome thing. Then there’s India, which is on track to be the world’s most populous country in the next couple of years. It’s experienced rampant price increases plenty of times before, so the current 6% inflation rate is, frankly, nothing new. Perhaps that’s why the country’s leading share index is shrugging this off and is up this year. Just imagine what a booming Indian economy – which many are predicting – could do for the world. Remember China in 2004-08, anyone?

Of course, no one can hide from the fact that the US and Europe have some issues to deal with. But if you flip the doom and gloom on its head for a second, there’s cause for optimism here too. Let’s take interest rates first. Well, higher interest rates give you the chance to invest “risk-free” in government bonds at returns not seen in 15 years – close to 4%. And sure, higher rates have been murdering expensive growth stocks, but the broader S&P 500’s down less than 20% this year. Market corrections happen, and they can present buying opportunities if you’ve got the stomach to see through the near-term challenges. People made millions, after all, by picking through the dotcom wreckage in the early 2000s. In October 2001, for example, if you’d bought $10,000 worth of Amazon shares at 27 cents a pop, you’d be sitting on a tidy $3.2 million fortune today – despite the worst financial crisis since the 1930s (2008-09) and a global pandemic in the interim.

🥡 Takeaways

1. Stay positive, people.

It’s as easy to get wrapped up in negativity as it is to get carried away with blue-horizon dreaming. Just a year ago the likes of Shopify, Netflix, and Amazon were riding high. And today, the stock prices of all those “pandemic-era winners” are where they were before anyone had even heard of Covid-19. The point is this: it might feel like the world’s ending, but it probably isn’t. Now, there’s no need to dismiss your well-founded concerns, but you should keep in mind that risk is a two-way street. Investors have learned a harsh lesson about risk of loss from this year’s collapse of overpriced tech stocks. But if you let that loss paralyze you, you could miss some sweet opportunities. And that’s an equally big risk.

2. Get fit.

The best way to get yourself in great investment shape for 2023 and beyond is to soak up as much insightful financial content as possible. Markets are a window into a world of endless fascination, and every successful investor will tell you to read, read, and read. Now, where might you find insightful, interesting, and educational investment content at your fingertips?

🎯 Also On Our Radar

Turkey’s stock market has been rocketing as local investors have poured their cash into stocks to shield themselves from the country’s hyperinflation storm. The iShares MSCI Turkey exchange-traded fund’s up 100% this year. That doesn’t leave a lot of spare change after the country’s 90% or so inflation, mind you, but it’s a damn sight better than leaving your lira in the bank.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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