Prices are rising, putting the greatest pressure on consumer budgets in the last 40 years.
It also means that it may be more important than ever for many investors to continue investing in the stock market.
Inflation in financial markets
With the return of high inflation, concerns about what will happen to the economy as a whole have grown. Almost every economic forecasting agency has raised its estimated likelihood of a recession.
It can be said that the chances of an economic slowdown are now higher than just a few weeks ago.
While we don't want to panic about inflation, we do want to acknowledge its effects.
As we have seen in recent months, a sudden jump in inflation can lead to various changes in the market and the emergence of high volatility.
Stock market
Stock prices and stock market returns are largely based on expectations of companies' future earnings. As inflation erodes the value of the dollar, it can make it difficult for the market to assess the current value of companies. Also, higher prices of materials, inventory and labor can affect the earnings of companies. As a result, stock prices can fluctuate, causing volatility and uncertainty in the stock market.
The gold market
Gold has long been perceived as a safe haven in times of inflation. This precious metal is used by investors to limit their exposure to the market during times of volatility.
For perhaps the best example of gold as a safe haven, we can take the example of the global financial crisis in 2008, when the price of gold rose by almost 24% during the following year 2009.
The theory goes that because gold has historically been considered a safe haven, when there are signs of inflation, investors switch to the precious metal.
Download the FREE Gold Book and learn more about this means of refuge by clicking here.
Cryptocurrency market
The big rise in cryptocurrency prices in 2021 has led some people to believe that digital assets can serve the same purpose as gold and other safe havens. Instead of putting money into traditional investments, investors could buy cryptocurrency in the hope that it will increase in value - making it less vulnerable to the impact of inflation.
What we've learned over the past few months is that the big changes when it comes to cryptocurrencies mean that the consistency needed to beat inflation is lacking. For example, the value of Bitcoin decreased significantly in 2022 at the same time that consumer prices began to rise. We can take this as a signal that Bitcoin and other cryptocurrencies are not a reliable means of refuge, although perhaps during 2021 the opposite could be assumed.
Maybe it's time to consider CFD trading
The advantage of CFD trading is that it allows traders to potentially make money by correctly predicting whether the price of a financial instrument (cryptocurrency, gold, stock...) will rise or fall.
The specificity of this way of investing is the possibility to earn both on the fall and on the rise in instrument prices. In addition, in this way, traders can use leverage to significantly increase their potential profit.
Now you can invest in a very simple and efficient way - by opening a trading account with a licensed investment company Limit Prime Securities.
This renowned company is regulated by the Capital Market Commission of Montenegro and through its platform offers you direct access to world stock markets and trading in the most attractive financial instruments.
If you want to start trading, you can register HERE, and for more information you can call +382 67 242 242 and one of the employees of Limit Prime Securities will meet you.
Email address: info@limitprime.com
Website: http://www.limitprime.com/me
Phone number: +382 67 242 242
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