Events and conditions in today’s economic and social landscape will either help or hurt your stock picks.
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Here are FIVE things to watch out for:
Debt
We are living in the age of over indebtedness. If a company is too over indebted or has customers that are over indebted, the risk to the economic health of that company becomes obvious. If you invest in a stock that’s exposed to debt problems, directly or indirectly, you’ll be at risk.
Inflation
Inflation is related to debt, especially government debt. When governments spend beyond their means, they go into debt (like the rest of us). However, when push comes to shove, they, unlike us, can print more money to pay this debt. Most governments that produce their own currency tend to overproduce money, and when you have too much money chasing too few goods and services, you get inflation. Given this reality, it’s important to keep some things in your portfolio that benefit from inflation, such as gold- and silver-related stocks, exchange-traded funds (ETFs), and energy and grain companies.
International challenges
Especially during these COVID times, the world economy is getting more unstable. Financial crises, government mismanagement, and regional conflicts around the globe will ultimately affect your stock portfolio. Given that, stock investors are more apt to push the panic button when the headlines scream doom. Therefore, check to see to what extent a company you’re thinking of investing in is dependent on those troubled lands.
Recession/Depression
As this article is published, various sources have pointed out that the United States is in a very slow recovery in the wake of the worst recession in decades. In addition, still more sources are warning that it’s in danger of relapsing into a second recession (the so-called “double-dip recession”). Regardless of how you look at it, the economy is having its toughest time in modern history. What’s an investor to do?
Commodities
In 2011, the world population crossed the 7 billion mark which surmounts to more human beings to feed, clothe and shelter. All of these people need more of what can be summarized in one word: commodities (or natural resources). Commodities include corn, soybeans, cotton, cocoa, rice, copper, zinc, and so much more. Stocks (and related ETFs) of profitable companies that provide and prepare commodities for general consumption will do well, and investors should participate.
