Right now, investors are facing economic headwinds: slowing global growth, disappointing earnings releases, and the infamous approaching fiscal cliff. However, there are plenty of reasons to stay invested or start investing now, even with the fear and uncertainty that surrounds the financial landscape.
Reasons to stay invested:
- Within the next year, uncertainties will dissipate. The fiscal cliff and the U.S. debt ceiling scenarios will likely have subsided, and the U.S. Presidential Election will be over. Usually, when uncertainty is replaced with certainty, investment and capital expenditures increase, so we could see some additional appreciation in equity prices next year.
- I believe the “Fiscal Cliff” will likely be a “Fiscal Slope,” since it’s highly likely that only a fraction of the entire fiscal cliff austerity will hit the U.S. in 2013.
- Housing is on a recovery path, which has a multiplier effect – this generally promotes a rebound in construction employment, and spending therefore improves because people feel better about their balance sheets, which is a major contributor to GDP growth.
- Recent evidence has shown that the Chinese economy will make a bottom during the fourth quarter of this year, which is likely to reduce safe haven demand and increase investor clarity.
- The European Central Bank’s decision to backstop sovereign governments has reduced the risk of a Eurozone collapse.
Brace yourself for what could be choppy ride in the next few weeks, though.=
Content provided by guest writer Paula Wieck, CLS Manager of Investment Research