With the stock boom in early 2021 it is natural that many people have wondered if it is a good time to invest in the stock market . While it is true that there have also been some ups and downs during the course of this year, the reality is that the world economic outlook is more optimistic than in 2020.
It must be remembered that the coronavirus pandemic caused quite surprising falls in different economic sectors. Therefore, it is especially positive to say that the economy is currently showing a considerable recovery.
However, even with so much optimism in the environment, it is no secret to anyone that investing in the stock market carries many risks, so it is necessary to delve into what it means to invest in the stock market in 2021 .
Factors to determine if it is a good time to invest in the stock market
The first thing to say about whether it is a good time to invest in the stock market is that it can currently be difficult to measure the effects that the pandemic will have in the future on the global economy. This is because the mix between the fiscal stimulus of the market and the monetary stimulus are elements that contribute to the creation of a bubble that can burst at any moment .
An example of this is in the NASDAQ of the United States, where an increase of 42% was perceived. Similarly, the S&P 500 presented an increase of 15% . Specifically, it should be remembered that with the discovery of vaccines many pharmaceutical companies managed to regain the value of their shares.
However, in contrast to this increase, drops of 50% have also been seen in companies such as Boeing and airlines such as British Airways . In short, the current stock market outlook is complex.
The ideal time to invest
Although the current picture of the world economy is complex, this does not mean that investing is not a good idea. Some experts consider that when market prices drop it is a good time to buy . On the contrary, when the market begins to rise, they consider that the time to sell has come.
From this perspective, it could be said that good investment opportunities may presently present themselves for those who are very attentive to the volatile movement of the markets.
However, due to volatility, some people find it more viable to invest in store-of-value assets such as gold, copper and silver, popularly known as “ commodities ”. This is because it is common for their prices to increase in times of crisis.
On the other hand, if the US fiscal stimulus continues over the next few years, the chances of good investment opportunities are increased . However, it is a good idea to have a diversified investment portfolio, so that good results can be obtained even if there is a negative outlook for the economy.
The impact of the coronavirus
Regarding the relationship between the impact of the coronavirus and the idea of whether it is a good time to invest in the stock market, it should be mentioned that some countries such as England and the United States have resorted to money injection policies through government bonds. These bank loans have been aimed at solving the impact of the coronavirus and have been created by the central banks of the respective countries .
These types of economic measures can be beneficial in the short term. However, in the long term, if the coronavirus pandemic is not adequately overcome, this can contribute to the creation of a bubble, which can have very negative consequences on the economy when it explodes .
Another scenario related to the impact of the coronavirus is that of the creation of a rebound effect. If this happens, there could be a very rapid stock market decline .
conclusion
To conclude, it must be taken into consideration that the combination of fiscal and monetary stimuli will make inflation practically inevitable. This could lead to a loss of purchasing power that will increase both in the short and medium term .
The only assets that could be immune to inflation are those that are often used as stores of value, for example, gold, oil, copper and silver. Despite the impact of the coronavirus crisis, the dynamism of these assets has managed to remain current .
However, there are certain stocks that have a lower risk of being affected by the current complex economic situation. For example, actions related to real estate and real estate .
In the event that there is a drop and it is considered that it is time to buy, the sectors where it might be more advisable to invest are those related to technologies that have a great future, such as companies in sectors such as robotics, financial technology or artificial intelligence . It must be remembered that technology companies such as Amazon and Apple managed to reach their highest values in 2020.
