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We've recently seen the stock market’s worst single point drop since January, inflation increased at the fastest pace since 1982, and now there's talk about a sand shortage. Here's what's going on and how you can best invest your money – Enjoy! Add me on Instagram: GPStephan
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Like I mentioned, last week, stocks began to sell off due to the concern that inflation is here to stay, prices of every day items are going up, interest rates will increase faster than we expect, and that’s going to put a damper on stocks, which BENEFIT from low interest rates.
Valuations of GROWTH STOCKS, like Tech, Solar, and EV – are incredibly sensitive to any increase in interest rates….that’s because those companies are valued on their FUTURE GROWTH POTENTIAL…and, when interest rates are low…investors can afford to pay a higher price for those stocks.
BUT…When interest rates go up, Treasury Bonds Yields go up, too, which start looking a LOT better in comparison….and all of sudden, tech and growth stocks begin selling off, bringing down the entire market alongside with it.
HISTORICALLY, Inflation was something that the FED STRUGGLED to produce…that’s because the cost of manufacturing is going down, we’re getting BETTER at producing higher quality items for less, and people are choosing to SAVE more money, causing high inflation to be a thing of the past.
But now…all of a sudden…we’re seeing WAY more inflation than what was originally predicted…so, what happened?
The ONLY REASON we’re seeing SUCH a high inflation rate, is because we’re measuring from the VERY BOTTOM of the market, during one of the largest inflation drops we’ve seen since 2008, and basing our year over year rate from THAT…which, is NOT an accurate depiction of what’s happening, AT ALL.
On the one hand – we have a LOT of unique factors that are ARTIFICIALLY driving up prices, and making it seem like things are a LOT worse than they actually are.Not to mention, there’s probably going to be temporarily high demand as people finally leave their homes, take those vacations they’ve been postponing, and finally “live it up” to get it out of their system while things return to normal.
But the fact is, we’ve got a LOT of temporary, unique situations working against consumer prices, driving up prices WAY higher than they normally would be…and from my perspective, there is absolutely no data that exists which would confirm that this will continue once everything re-opens at 100% capacity.
As of this month, we KNEW this was coming – we were TOLD what to expect – but, the market is going to react negatively, ANYWAY, and the question then becomes: do you think persistent inflation will actually be an issue and the FED is WRONG? Or, do you think the market is over reacting, and by the end of the year, things will return to normal and prices will come back down?
Personally, I believe the latter…I’ve made so many videos explaining that this was going to happen, and now – I see is as a good opportunity to keep averaging into the stock market, buying in at discount, and then holding through whatever happens in the short term – even IF the market continues going down.
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