Its time for investor to enter stock market
The inflation will fall fast is the cue for investor to enter stock market. The economic condition indicate that Fed may not take aggressive view on monetary tightening. This will remove fear of recession and be good for stock market.
In this fear stock market there are many investors who sell. Where as this is right time to start buying the fear selling market for long term. Now many good shares like Apple Inc, Microsoft, Amazon or Google etc. are available at appx. 30% discount. People buying good quality shares now will make money in coming years. The history has shown people who bought good stocks in fear market has made good money. The symptoms of recession causing fear is good for share market investment.
It is seen in past that the time it take for inflation to rise, it take same time for inflation to come down. This time it is seen that inflation started raising since April 2021 and was at peaked 9.1% in June 2022. It is expected that inflation will be down by June 2023.
In past years when inflation was high during 1970, 1975 and 1980. One year after high inflation S&P 500 has given almost 30% return.
Some of key reasons for decline of inflation and buy signals for stock market in coming year :
Fall in crude prices.
As price of WTI and Brent Crude is down by 25% from its high in March 2022. This decrease in energy cost will reduce inflation in coming days. High gas prices increase the cost of production of goods and also cost to transportation. Which result in higher cost of product and services. As prices of crude fall fast, in same way inflation will come down fast.
Ease in labour market.
The Bureau of Labour Statics reported drop in job opening to 10 million in August from 11.2 million in July. This will reduce the pressure of wage increase. The reduction in pressure of wage increase will keep cost of production and services in check. That will help in reducing the inflation.
Fall in commodity prices.
A sharp fall in the commodity index is observed from the high in month of May and June 2022. The increase cost of commodity increase the cost of expansion by industries and stall infra development.
Improvement in supply chain.
The supply chain which got disrupted during COVOD 19 and then in March 2022 due to Russia invades Ukraine. It has been observed now that delivery lead time has reduced. The inventory in stores are improving.
Improvement in supply chain.
The supply chain which got disrupted during COVOD 19 and then in March 2022 due to Russia invades Ukraine. It has been observed now that delivery lead time has reduced. The inventory in stores are improving.
Conclusion.
As there are signals faster the inflation will fall down. The Fed may not increase rates aggressively, that will be the signal for the end of bear market. Reduction in gas prices has given confidence that inflation will fall sooner.
Present extreme bearish sign from investors is good time to buy. I remember a famous quote from Mr. Warren Buffett
“Be fearful when others are greedy and greedy only when others are fearful”.
As today people are fearful, its right time for investors to enter stock market.
