In 2021, growth prospects seemed enticing for capital markets. Its global size ballooned to hundreds of trillions with double-digit year-over-year growth. But not even a year later, the scenario has completely changed. Inflation has started to cool down but remains elevated at 7.7%. Meanwhile, interest rates will go as high as 5% in the next twelve months.
With the looming recession, the market is plagued with pessimism and uncertainties. Investors and entrepreneurs alike are anticipating a massive crash. Given these overwhelming changes, prudent financial planning is crucial to hedge market risks.
Fortunately, a lot of financial resources are still showing a rosy future. This article will list the best assets to watch for better wealth-building and protection.
Primary stock composite indexes, such as DJIA, NASDAQ, and the S&P 500, had a sharp downtrend. This bearish pattern has been visible since the latter part of 2021. Sadly, they have not recovered as inflation, and European tension continues to hammer the stock market.
You may think it’s time to sell your stocks to avoid further losses. It’s even tougher to determine a good entry point to make a stock position as uncertainties pull prices downward. Although there has been a slight revival in the last month, its consistency is yet to be revealed. If you check the short-term moving averages, say one month, most stocks still move sideways. But year-to-date and six-month moving averages show the opposite.
Amidst downturns and price corrections, this phase appears to be normal. The US economy is yet to stabilize and bounce back. Also, it can be an opportunity to buy stocks at their lows and realize attractive yields in the long run. Even better, many stocks remain committed to dividend payments with excellent yields.
Banking stocks can be ideal as interest rate hikes lead to higher interest fees on loans. But you must check some accounts, such as interest income and expenses. They will give you a clue about how the bank manages its loans and deposits. Compare your initial observation by referring to its loans, deposits, and loan-to-deposit ratio. Also, check its cash and investments and their percentage of total assets. Other essential metrics include Debt/Equity Ratio and Return on Average Equity.
Hotels and accommodations are also good stocks to watch due to revenge travel. They haven’t unleashed their full potential as restrictions and pandemic fears persist. They may also be hammered in the next few months due to seasonality and inflation. But once the economy reopens and summer comes, prices may fire up. Before buying hotel stocks, check the business model. A business based on RevPAR (revenue generated per available room) appears more flexible and viable than leased contracts.
Other industries to watch out for are human capital management providers, E-commerce, logistics, and the freelance market. They are timely and relevant as remote and hybrid work setups become the newest trend. Also, insurance and consumer discretionaries can be low-key but sure choices.
Bonds, in general, are not a wise choice today due to their inverse relationship with inflation. Interest rate hikes are a disadvantage to them. But TIPS Bonds or Treasury Inflation-Protected Securities are different. The government backs these securities, so they have a natural hedge against interest rate hikes. They are inflation-linked bonds, so annual returns and valuations are more stable.
Wealth accumulation does not end in businesses and investments. After building your wealth and stabilizing your finances, you must find ways to protect them. One of the most typical ways is by purchasing insurance. Life insurance has become a staple amidst the pandemic. Meanwhile, property and casualty insurance has become a vital component of climate finance. Unforeseen circumstances can deplete your savings, so insurance will cushion their blow.
In 3Q 2022, house sales started cooling down. After the median house price set another all-time high, prospective homebuyers realized they could only take so much. This quarter, mortgage demand is 38% lower than in the same quarter in 2021. It’s even lower than the twenty-five-year average. With that, the real estate market may head to one of the most significant house price corrections in history. That is the perfect opportunity you must seize to buy one. But of course, it will take a long and winding journey as housing shortages in the US remain high.
If you already own a house, you can make money by leasing or renting it out. Higher house prices lead to increased demand for rental homes or rooms. It will be lucrative if your property is near a tourist spot. Check the average rate in your area and match it with inflation to set a more strategic rate. Hence, you will still generate stable returns when house price corrections start. Other investment methods are Real Estate Investment Trusts (REITs), mutual funds, and exchange-traded funds (ETFs).
Putting up a business can be an odd and risky move as the US heads into another recession. Despite this, a lot of opportunities are present in the market. The changing workforce landscape, digital transformation, and E-commerce are some examples. You can even start a business with an initial capital of $100.
Using your laptop, you can enjoy your business journey even in the comfort of your bedroom. You can provide the most in-demand services, such as web designing, content writing, and event planning. Life coaching and digital marketing can also be lucrative. But you still have to consider the competition. You also have to know the ins and outs of the market to get ahead of your peers. Thankfully, there are expert providers like doola to help you at a very reasonable price. You’re sure to get all the business ideas and legal advice you need before registering your business.
Market volatility remains intense despite a slight inflation lull in the last three months. A lot of risks can disrupt your finances. Yet, you can find more opportunities to build and protect your wealth. There are durable assets that can cope with or flourish amidst the current changes.
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