In today’s Money Morning…cash is (still) trash…finding the right strategy for you…the race for green hydrogen is on…and more…
It seems tech stocks are finally falling out of favour with Wall Street.
Or, at least, they’re beginning to.
Last night saw the tech-heavy NASDAQ slide for a second straight session. Its first back-to-back decline since September. A worrying sign for some.
Just like last week, it is the rising bond yields and fears of inflation driving this latest downturn. Concerns that I, personally, believe may be a little too premature.
I’d be shocked if Jerome Powell and his Fed cronies don’t intervene if the bond threat becomes too great. After all, what is modern monetary policy other than market manipulation nowadays…
Having said that, I don’t think we’re at code red levels just yet.
This recent market trepidation — from both the US and Australia — may or may not linger.
After all, it’s only natural for stocks to cool off at some point. Especially after the dramatic bull market we’ve had over the second half of 2020.
Whether that means markets are just catching their breath or getting ready to keel over for a bigger drop though, is the ultimate question.
A question that doesn’t have easy answers.
So, is it worth getting out in the stock market right now?
Cash is (still) trash
Back in January 2020, boisterous hedge fund manager Ray Dalio declared ‘cash is trash’.
A catchy euphemism and rallying cry to investors to jump into the stock market. Little did anyone know that the pandemic was about to throw a wrench in those plans…
However, as the year went on, it was clear that Dalio was right. In fact, he was righter than even he would have believed.
In the wake of the pandemic, central bankers have committed to a destructive paradigm for cash hoarders. Keeping interest rates at dramatically low levels and pumping the economy with billions of freshly printed dollars.
For savers or people relying on term deposits, this has obviously been terrible. With these ‘safe’ investment strategies quickly turning into non-starters. And it may only get worse from here.
If the RBA takes interest rates to zero — or worse: negative — sitting on cash could actually erode your wealth. Arguably, even now that is likely happening, with the forces of inflation (no matter how low it may seem) working against the dollar.
It’s so bad that even our Editorial Director, Greg Canavan, is adamant that you need to get out of cash. A theme that he is outlining right now in his ‘Life at Zero’ webinar.
If you want to learn how to navigate these choppy markets, I’d recommend you check out this event. Which you can access, by clicking here.
Keep in mind, Greg has a staunchly traditional approach to the markets too. With over two decades worth of experience under his belt, he prizes value and low risk more than most.
So, for him to even come out and call out cash is telling.
Finding the right strategy for you
Now, just because cash isn’t the place to be, doesn’t mean that all stocks are a good fit either.
In Greg’s view, good value is the way go. Focusing on stocks that have solid earnings, and ideally a track record of profitability. As well as ensuring that investors aren’t overpaying for said earnings.
Call it old hat, or contrarian, but it certainly isn’t a bad strategy. Especially if you’re looking to derisk your investments as much as possible.
It’s a tried-and-true methodology that is backed up with plenty of experience.
However, if you’re a little more daring, it certainly isn’t the only option.
Small-caps have always been my personal bread and butter. Along with my co-editors: Ryan, Lachy, Murray, and Selva.
I firmly believe that they will always be the best place for people to make the best returns possible.
So long as you’re willing to stomach the risks and have the patience to endure the volatility.
And I still stand by that sentiment, even in the midst of this market impasse. Which could see stocks head lower or higher.
Because at the end of the day, it’s all about sticking to what works best for you. As long as you stick to a system or strategy that works, you should be able to weather whatever the market may throw at you.
But if you’re looking for a good place to start, then I’d definitely urge you to listen to Greg.
Once more, you can hear everything he has to say by accessing his latest event, right here.
Editor, Money Morning
Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.