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Not only is a stock market rebound imminent, I think it’s already happening.
It’s messy, of course. Not all stock prices go up. Some even fall. But it is likely that this is just a working process of a bottoming market. Therefore, I am buying selective stocks now to hold them for the long term. But only when I see good value and good future growth prospects for the business. And when there is some recent good news about bag trading.
But what about the many asset bubbles we’ve seen? Did they all explode or is the danger still? Is it wise to wait until they all shrink before investing in stocks and shares?
For me, the most important assets to think about are stocks and stocks themselves. More specifically, individual companies that I may want to invest in. So, my focus is on the streaming news from companies and current valuations offered by the stock market.
There is always a bubble somewhere
However, sometimes asset bubbles have the potential to derail stock market investments. A good example of this is the subprime mortgage bubble that caused stock prices to crash due to the credit crunch.
But there always seems to be a bubble somewhere. Speculation and human nature have provided numerous examples over the centuries. For example, lately we’ve seen bubbles in assets like cryptocurrencies and meme stocks. We can live in a bubble in commodity prices now.
I think it is unrealistic to wait for every bubble to burst. There is always a bubble in something somewhere, so there is something to worry about. But that won’t stop the stock market from climbing the usual wall of anxiety.
Why don’t you recover now? Several companies have traded well and there have been many recent positive updates for the company. However, a lot of companies still seem to have low ratings. Many stock prices are still close to recent lows.
strong business indicator
One of the strongest indicators of business strength is the way many companies buy back their stock. Companies tend to do this when they have surplus cash beyond what they need to reinvest in their business. In theory, it helps shareholder returns by reducing the number of shares outstanding. So, the remaining shares are worth more to the investors because they attract a larger share of the company’s future profits.
There may still be asset price bubbles and the straight economic path seems a bit bumpy. But I have great confidence in the ability of many companies to adapt to changing circumstances. We’ve seen a lot of that through the pandemic. We see it now with the price inflation crisis.
So, for me, this is the time to shop for strong, enduring corporate stocks right now. And my goal is to hold the stock over the long term as operational progress unfolds in each core business. Meanwhile, the inevitable sound of bubbles swelling, deflation and exploding just wouldn’t stop me!