Hedge Your Bets and Balance Your Risk Profile
Top 5 of the Week of January 25
With the first month of the new year coming to a close this week, we have a very mixed set of articles to offer you. Those of you keeping up to date with the current state of the market will no doubt have heard the whispers and rumors of a stock market crash and a recession potentially looming ahead of us all again. We ask if the recent oil prices are of any consequence, and cast an examining eye over the condition of the Red Empire – China’s economy. Though it’s always difficult to predict the future; we can hope as one of our articles suggests that not all is doom and gloom ahead. But as is only sensible in uncertain times we have a few suggestions to help mitigate your max pain when it comes to investing.
Are We On Route to a Recession?
Recent falling oil prices are a concern at the top of everyone’s mind at the moment in the financial world. Here, Jim Hamilton reflects on the relationship between crude oil, the stock market and the effect these lowering prices may have on the overall economy. In short though, if we look at economic history we can see that lower oil prices have never, in fact, caused a recession in the U.S. Though higher oil prices certainly have – for example, following 1973 and 1979. And if as he argues there is any correlation between the two, it is not necessarily going to have such a negative impact. In fact, as he suggests, there is just as much chance of a positive boost to the U.S. economy over a negative one.
Balance Your Risk Profile
This article looks at how to address your max pain points when it comes to investing. As Cullen Roche states, we tend to discover how our risk profile should look, the hard way—a disturbing lesson we don’t want to learn when it is our savings that are out there fully or mostly invested in the stock market. Working out what your max pain points are early is the path to success. Don’t follow the same route others have taken of selling low after buying high after learning this about themselves. Too much of an emotional response rather than a calculated one.
A Silver Lining to Federal Reserve Interest Hikes
Here’s a positive outlook for the future following an announcement by the Federal Reserve that they are doubling their interest rate. While some believe this might have a negative impact, Michael Vodicka urges us to look to the international market following Fed rate hikes in the past. In each circumstance in the past 35 years, international stocks have outperformed the U.S. stock market—also a likely outcome to expect for the next year at least. Though the article continues to outline some specific stocks, we thought it was more interesting to highlight the positive effect Fed rate hikes can have outside the U.S. for our readers. It is potentially worth taking a look at large international companies that derive their income from their local markets, those who remain unaffected by the U.S. economy and Fed’s rates.
Strong Words About A Strong Economy
We brought this article to light for you to offer a stirring alternative perspective on the state of China’s economy from David Stockman. As the world’s second-largest economy continues to make the move away from its manufacturing roots—the steel industry—eyes are watching to see what effects this, along with its stilted growth in 2015, will have on what seemed to some previously an unstoppable global force. Are we really watching the country “on a wild tear heading straight for the economic edge of the planet”? We suggest drawing your own conclusions on what the future may hold for China.
Let us know what you think about China and Stockman’s view in the comments section below.
Hedge Your Bets
Though this may not be the most exciting article that we link our readers up with, it’s worth a read to see the benefits that bonds can hedge to your stock portfolio. It is in bonds we place our asset trust during times of uncertainty in the market such as these—they are the ballast in our portfolios. When stock markets do, as they occasionally have a tendency, go a little haywire, long bonds continue on average to do well. So, think about both the positive return and diversification benefits of reducing the risk in your portfolio and bond with the U.S. Treasury.
Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form – and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.
Anything you would like to discuss about this week’s top 5? Do you have another favorite that isn’t mentioned here? Feel free to add it below. Let’s start a discussion in the comments section!
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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article. The Babinow Team doesn’t necessarily endorse any stocks or shares mentioned in the articles or the author of such articles linked to and summarized in Top 5 of the Week and cannot guarantee the accuracy of its information.