Bumpy Road Ahead Of US! - Dead Cat Bounce Just The Beginning?
It looks like the markets are finally recovering for a bit after getting slaughtered over the past few weeks. But is this the turning point? I certainly do not think so! I think we are experiencing a dead cat bounce which will suck even more money out of the investors pockets. But we will probably know whether this is a dead cat’s bounce once it will continue to crash again. Nevertheless, I think that the situation we are in is a very good wealth building opportunity and in this article I want to discuss why every investor should stay calm and keep working.
Investing On Easy Mode
Let’s jump back real quick, to the dark and scary times of the pandemic. When COVID hit and lock downs started the situation was very scary! How will the economy handle this? Can people keep their jobs and will it even be possible to go outside without being in big danger by a virus? All of these questions were very quickly solved and the government helped to resolve these issues with big stimulus checks! Everybody who was sitting at home was getting free money and because a lot of people did not know what to do with this free money, they decided to let it flow into the markets!
This lead to a big increase in the stock market but also in the crypto market as well. Every coin and company was overvalued and many experts were warning about a bubble! But during these party times, nobody cared! It was free money that you did not have to work for. And seeing all these influencers making 100x on their investments and becoming millionaires over night, motivated a lot of people to get into the markets as well!
Receipt For Party
Well, nothing in the world is free and after a night out the check always comes! This was the case in this situation as well. Everybody seemed to have forgotten that the pandemic is still going on. With it also a lot of restrictions in other parts of the world which lead to supply chain issues and resource shortages that are influencing the economy to this day. These issues are letting the prices of normal day goods and housing go through the roof. Combined with inflation caused by the big amount of free money as well as the war situation, the final receipt for this big party we had over the last few months seems to get bigger and more expensive.
This is why the FED is trying to step in and sacrifices the economy in order to calm consumer prices down again. Right now we have around 7-8% inflation but it is truly possible that it will rise over the next months even more. Like we already established, the FED is trying to keep these prices under control by rising their interest rate. This of course leads to less money borrowing which also leads to less consumption which ultimately leads to less profits for the companies which then will trade at a lower stock price. This goes for crypto as well. Less people are having money to buy BTC & Co which leads for less demand and then reflects in the price.
Chance For The Future!
So is everything bad and we should just focus on our every day life and not another with investments at all because it is all a big Ponzi scheme where only the top 5% wins like always? Well, I don’t think so. Throughout history, there were some situations like these and after a few months of recession, the markets always bounced backs and awarded the ones who stayed calm and level headed. In my opinion, this situation is a great chance to asses the assets you are invested in. Will they still be relevant in the future? Is their business model still valid? Are they operating during these hard times equally as they did during the great bull run we saw?
If all of these questions were answered correctly, I think that it does not matter which economic situation we are in right now. I think that investing into the S&P 500 proved over time that long term investors will benefit from it. The trick is to stay consistent! With crypto it is obviously something different because we do not have too much data on this specific asset class but I think especially this community would agree with me that assets like Bitcoin or other crypto projects will have a place in the future and once regulations allow more institutions to dumb their money into this industry it will see an incredible price increase.
In my opinion, these next few months are a great chance to test your values and strategy! Everyone who just started investing can see this as a very good opportunity to learn and how to behave in difficult times like these. This bear market will probably take longer than the usual once but the end of this will probably give a lot of rewards and experience to those who are still having skin in the markets and do their research on the current situation. I am excited to add another learning chapter to my investment journey and will try to make as much as possible from this situation, how about you? 😊
Published by ga38jem on
Steemit
On 16th July 2022