It’s no secret that the global equities markets are in pretty terrible shape. Every major index has been pummeled for the past year, longer in some cases. But as savvy investors and intrepid traders know, a historically weak stock market can spell opportunity for those who know what to buy and when to acquire it. But the challenge is about more than timing; it’s focused on economic dynamics like inflation, an anemic US dollar, declining share prices, sideways markets, general economic malaise, and the potential for another round of the COVID pandemic.
What’s the good news? Newcomers to the world of investing can choose their favorite niche and employ multiple tactics for profiting at what could be a perfect time. Whether you are brand new to the scene or have been investing and trading for many years, consider the following strategies for each of the listed market dynamics. Online trading is one of the simplest ways to test out one or more approaches, keep risk as low as possible, and learn a lot about investing by opening a small brokerage account.
Weak Dollar: Consider Forex
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Forex trading is well-suited for those who want to avoid parking all their capital in dollars, especially in environments where the USD is falling in value against major world currencies, like the yen, pound, and euro. From your favorite forex brokerage site, visit the metatrader 5 download page, and become familiar with the main features of the platform. MT5 is the premiere FX platform, but users can use it for futures contracts and ordinary stocks as well.
If the USD is ailing and you want some economic protection, it’s possible to find a stronger currency and buy it against the dollar. To do so, say you believe the euro will gain strength as the USD weakens, as a hypothetical example. The solution, in that case, would be to purchase the pair EUR/USD, which means you’re acquiring euros and selling dollars. In basic terms, you’d be shorting the dollar and going long on euros.
Sagging Stocks: Pick Up Bargains
It’s impossible to time a market bottom, though people have been trying to do so ever since there have been stock exchanges. Even so, the major global indices have been on a downward trajectory for a number of months. When the bottom is near, there’s usually a question of should you buy stocks now or wait as well as a concurrent rise in buying volume. That’s often a reliable sign that people firmly believe prices are ready to turn upward. Watch the volume on your favorite shares and be ready to pick up some bargains. For some of the biggest corporations, share prices are lower than they’ve been in years. That’s a potential opportunity for cautious investors.
Inflation: Try Precious Metals
When inflationary pressures are intense, as they have been for the past months, precious metals usually attract attention from those who want a safe haven for their money. One strategy is to maintain 10% of a long-term portfolio in gold, silver, platinum, and palladium, or any combination of the four precious metals. While metals like gold and silver don’t always rise in the face of drooping equities, they tend to outperform most other asset classes during inflationary times. If consumer prices continue to rise at a nearly double-digit rate, the precious metals sector might offer more opportunity than anything else.
Short Selling Equities & Currency
The time-honored technique for taking advantage of an ailing financial scenario is short selling. Essentially, it’s a mathematical and fully legal way of betting that the price of a given asset will fall, not rise. The method works for both equities and foreign currencies. However, the majority of brokers place multiple restrictions on the practice when traders do it with equity shares. Forex brokers have no such rules or restrictions because the nature of buying and selling currency pairs makes shorting simple. Whenever someone purchases a pair like the US dollar and Japanese yen, USD/JPY, they’re shorting the second half of the pairing, in this case, the yen.
Pandemic Fears: Focus on the Healthcare Sector
If COVID strikes again, and some think it will, the economy could do a repeat performance. That could amount to the overall securities sector performing poorly, with the exception of healthcare and select energy stocks. From early 2020 until mid-2022, both crude oil and health-based corporations were among the very few profitable survivors as businesses shut down, millions of workers were laid off, and the financial sector slowed to a crawl. If the virus makes another visit, keep an eye on large healthcare corporations, hospitals, and pharmaceutical firms. Also, oil tends to perform well in uncertain or recessionary times.
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