It's clear that the stock market is one of the few strategies you currently have to make your savings grow, even with the risk of market downturns and other destabilizing factors. But you don't have other alternatives due to the monetary policies being implemented in the world's major economic areas, which have led to incredibly low interest rates, unlike anything seen in recent decades. To the point that in the Eurozone, the interest rate has reached 0% . In practice, this means that the main banking products (term deposits, bank notes, etc.) offer no return and are therefore not attractive to invest in, at least not at the moment.
Given this general overview of the financial world, one of the few options available to you is to turn to the stock markets, whether domestic or international. It's the only way to achieve a reasonable return on your savings . However, this return is by no means guaranteed; on the contrary, you'll have no choice but to accept some risk, including the possibility of losing part of your investment. But that's what the stock market is all about, after all. Nothing more and nothing less than the stock market.
But you should also anticipate that equities can start falling at any moment. Right when you least expect it. Because it always happens this way. At the least expected moment, a trend reversal occurs, leading to almost massive cuts in stock prices . This is one of the risks you must become familiar with from this point forward. It wouldn't hurt to use all available tools to anticipate these shifts in the trend of the main stock market indices.
Stock Market: Why can it depreciate?
It will certainly be very important for you to consider the reasons why the stock market might fall . Because, indeed, if something goes wrong in this direction, it will start to affect your investment portfolio's bottom line. And perhaps with more force than expected. Therefore, it will be very useful for you to anticipate the factors that could trigger this reaction from this point forward. Ultimately, this will determine whether or not you achieve your goal of making your savings grow through the financial markets.
One of the clues about what might happen from now on lies in the fact that a growing number of financial analysts are warning of a very worrying development for your interests. This is none other than the possibility that Wall Street is in a bubble , but for it to turn around, we would need to see interest rate hikes and a recession. This is certainly a truly worrying piece of news that could explode at the most unexpected moment, with very disruptive effects on any open positions you may have in the equity markets.
You must be very concerned about this scenario that can present itself from these precise moments. Where caution should be the common denominator of all your actions in the stock market. Any slip can cost you dearly, more than you initially think. To the point that a very important part of the invested capital can be seen to evaporate. To avoid this complicated scenario, you will need to import a series of tips that will help you prevent the worst of situations.
Factors: little bullish run
Some sectors of the equity market are frankly oversold. Or at least very close to reaching overbought levels. Want to know some of them? Well, it's one of the most important sectors in the financial markets: the banking sector, where a large portion of small and medium-sized investors have positions. Perhaps this is your own situation, for example. You must remember that this is a sector that drives all kinds of securities, with a constant exchange between buyers and sellers.
Indeed, the financial sector has undoubtedly been one of the stock market's biggest winners in recent months, which might lead some investors to believe their upside potential has run out. However, some experts and analysts consider their stock prices still to be undervalued , especially compared to the rest of the market. It's also important to remember that these stocks have been punished in recent months, particularly those of European financial institutions, and especially Spanish banks.
Possibility of a big recession
Another warning sign regarding this significant drop in stock markets worldwide could stem from a recession in one of the major economies of the new world order. Examples include the United States, the European Union, China, and Japan, among others. This would provide the perfect pretext for a major correction, perhaps even one of unusually high intensity, following the recent upward trend of several years.
In this same vein, some voices have been raised that warn of this worrying scenario, which will ultimately affect your profit and loss statement in the equity markets. Some even go so far as to say that it will be inevitable in the medium or long term . Because, after all, we're talking about the stock market, and that means that sometimes you win, but sometimes you lose. And who knows if this time it will be the latter. You'll have no choice but to be very well prepared for the effects that may arise from this very moment.
Application of interest rates
Although with a significantly smaller margin of influence, monetary policy on either side of the Atlantic can have a decidedly perverse effect on the stock markets of these important areas of the global economy. This could serve as a benchmark to finally trigger a reversal in the trend of international equities, pushing them well below current levels. From now on, you will have no choice but to pay close attention to the statements of economic authorities.
Because it will almost certainly determine the path the stock market takes in the coming months. You can't forget that an interest rate hike is never well-received by financial markets . And that's the prevailing sentiment right now. The only question is the intensity with which these measures will be implemented. Many economists are already warning that this process could ultimately affect your stock market positions.
Even the potential impact of Donald Trump 's presence in the White House is a factor. However, there is considerable disagreement about what might happen this year, since he took the reins of economic policy. This could even lead to divergences between different economic sectors. In other words, it's possible that some stock markets could continue to rise while others could be negatively affected by the new US president's trade policies. This scenario cannot be ruled out under any circumstances.
Different business cycles
To determine which factors could trigger a truly bearish scenario , it's essential to remember that equities are governed by economic cycles. Who's to say we're not facing a trend reversal and are very close to a bearish scenario? It can't be ruled out entirely, as it's a very logical possibility. In fact, this has been happening for many decades, as you can see through a detailed analysis of the stock market by reviewing its history.
In any case, it seems very clear that we are very close to this situation, closer than you think. It may be a matter of just a few years, but make no mistake, it will eventually arrive as a phase in this process in the equity markets. The best thing you can do is stay away from the financial markets . The more you stay away, the better it will be for your personal interests. It will be one of the most effective strategies for protecting your savings, in a simple way that won't cause you many problems to implement.
All these circumstances we've outlined don't necessarily mean they will happen. They're simply possibilities, and certainly not science fiction . You should simply be aware of these situations so you can develop strategies to navigate these potential scenarios. Or even better, so you're in the best possible position to maximize the returns on any financial contributions you decide to invest.
One of the best examples is actively managed investment funds . They can adapt to any kind of situation, even the most unfavorable, such as a prolonged decline in equity markets, by generating unexpected gains. You can also achieve these goals through other financial products.