Further to the Stock Markets rise and fall

Further to the Stock Markets rise and fall

Where to invest?

Appalling stock market falls yesterday beg the question, what are our investment choices?

I have concluded that with the two exceptions of purchasing a residential property or holding cash, shares, despite these falls, remain the way forward.

The alternatives

Cheap money.

Central banks are likely to release more money to stimulate the economy. This means that, historically, low-cost money will cost even less.

This move is intended to stimulate business as it should then be even less expensive for a business to finance its growth.

Bank deposits

Inflation is higher than bank interest rates therefore holding cash in the bank results in its purchasing power falling. Money held in the bank loses its purchasing power because the interest rates are lower than the rate of inflation.

Government Bonds and Gilts

Currently, these offer the lowest rates in history so purchasing bonds or gilts doesn’t work either.

Commercial Property

The reconfiguring of the economy due to online trading is already forcing the Commercial Property sector to rethink its philosophy and traditional Commercial Property is not the attractive investment it was 20 years ago.

So where does that leave us?

Looking at the potential to inflation-proof money by buying shares in quality companies whose share prices grow.

But if share prices have fallen doesn’t that mean company shares are poor value?Further to the Stock Markets rise and fall

No, just the opposite. The companies favoured by the most successful investment managers haven’t suddenly become worthless. Their underlying ability to grow their income, make a profit, and subsequently, increase their value should result in a rise in their share price. Particularly now after such a dramatic fall in share prices

So what has caused the problem over the last few days?

  1. The fear that the Coronavirus (COVID-19) will result in all commerce coming to a halt.
  2. The oil price “war” between Russia and Saudi Arabia

The most likely scenario in three months’ time?

  1. The stock markets will have risen as it becomes apparent that the Virus has a finite life span and is gradually being eliminated.
  2. Oil prices will remain low, therefore investment in the oil sector will fall.
  3. Confidence will gradually be evidenced through “cheap” money being invested into undervalued shares and the growth in stock markets will resume as quality shares ultimately are inflation proofed and offer superior value to all of the investments noted above.