Is Now The Time To Start Thinking About Investing?

Following a difficult year in 2022, where investors struggled to see portfolio gains, 2023 has already provided some opportunities to investors. Whilst the initial strength in financial markets so far this year has been rocked by the recent collapse of two US banks, this does not take away the opportunities for those wishing to invest for the longer term.

The need to retain patience, in what will be a long-drawn-out recovery from the pains of the fight against the current inflationary environment, still holds true. However, there are also opportunities that this type of market cycle presents. For stock investors, shares are commonly used as a hedge against inflation for the long term as interest rate returns on deposits struggle to keep pace with the rising costs of living. This means that the ‘real’ value of that stock – the goods or services it can be exchanged for – remains constant despite higher prices after a period of time. This is due to the higher price of goods being passed onto consumers after a period of price revision.

With the peaks of annual inflation in most countries now passed, the seeds of the longer-term road to recovery have been planted by many global economies.

Sudden increases in inflation are generally considered the most painful. As inflation is now generally starting to fall again, the short-term dynamic of rising inflation has now largely been become part of many people’s lives. Typically, the effect of inflation on stocks is that of an inverse correlation – i.e., as inflation rises, stock prices fall, or as inflation falls, stock prices rise. If this holds true, with stock prices at a point where they should rise again in future, now could be an opportune time for some to consider investment of capital into a well-diversified portfolio, geared for longer-term capital growth.

I have a number of clients who have excess cash held on deposit over the last number of years who are now looking to invest as they too can see the opportunity of the timing represented by the market conditions. With deposit-based interest struggling to provide any real value of return, alternative strategies are being readily considered for the future.

Whilst our general message has been to ‘keep calm and remain invested’ with a cautious approach over the last year, we are now seeing much more enthusiasm and positivity for investing. If you think this may be the time for you or would like to discuss your investments, please do not hesitate to get in touch with an Integrity365 Independent Financial Adviser.