The market has bounced!
Hooray, we’re all saved!
Or… is it just a distraction from an ongoing gutting of the markets? Besides, why has the market bounced?
Isn’t a change in the mood of the US Federal Reserve (aka the Fed – that country’s central bank) supposed to decimate the growth market and make everyone sell up and move into value stocks?
As you know, growth stocks are those whose businesses are likely to expand sales and earnings very quickly over the coming years. Many are, in some way, tech related.
By contrast, value stocks tend to be long-established businesses that appear cheap in terms of a widely used yardstick such as the price/earnings (PE) ratio: often these companies pay a fairly substantial dividend.
When inflation in the United States has come in at 7% for December (year on year) it’s clear that there’s an inflation issue. We’ve been warning of this for at least a year now. The UK is sure to follow suit as well.
How do you combat the rise in costs and prices?
Well the smart money would be looking for investments that can pay you while gaining in capital value. But that’s not the whole story.
Also, it’s not just as simple as moving out of growth and into value.
It’s about balance and understanding what you might be leaving and what you might really be getting yourself into long term.
You might actually be getting yourself into a world of hurt long term just for some shorter-term chance to “make bank”.
Perhaps there’s more than meets the eye to this idea of rotating investments from growth stocks to value stocks because cheap money is just going to be slightly less cheap.
It could be that the real opportunity is actually in the very segment of the market that the market hates the most right now.
Specifically, this means stocks that show a trend towards greatness, but which are currently misunderstood.
It’s a nuanced approach to dealing with the market and your portfolio right now, an approach we think you need to know more about.
In today’s Exponential Investor Podcast we dive into the idea that moving from growth stocks to value stocks is far more dangerous than it first appears.
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