Updated June 2023
Is buying stocks worth it in June 2023? With the S&P 500 up 14% YTD and the AI craze taking hold, many investors are considering an increase in their allocation to stocks. However, we think it might not be a good time to buy equities.
Is Now A Good Time To Buy Stocks?
Right now, we do not think that this is a good time to buy stocks. In our Asset Allocation, we are currently underweight equities. The primary reason behind this is that inflation remains high. As such, we believe the Federal Reserve will raise rates to a higher percentage. Macro Hive’s Dominique Dwor-Frecaut believes the rate will go as high as 8%.
If that happens, equities will likely experience a downturn as a whole. John Tierney’s analysis in late April stays true: it is better to stay defensive, although we like certain sectors such as financials.
Should I Sell My Stocks Now?
While we are currently underweight equities, that does not mean you should sell all your stocks. As stated previously, financials appear attractive right now due to the potential increase in interest rates. We also think ‘quality’ stocks are attractive in an environment of slowing economic growth and higher interest rates as they offer exposure to companies with high profitability and strong balance sheets. Finally, we like emerging market equities. China’s recovery continues to progress, so we expect Chinese companies to benefit from a sequence of earnings upgrades.
On top of that, holding on to your long-term picks might also be a good idea. If you have stocks that you bought with the intention of holding for twenty years or for their dividend payments, you may wish to ride out shorter-term dips.
Stock Market Investment For Beginners
What Is The Stock Market?
The stock market refers to the collection of exchanges and platforms where the buying and selling of publicly traded stocks, bonds, and other securities take place. It provides a marketplace for companies to raise capital by issuing stocks and for investors to trade those stocks.
In a stock market, companies list their shares, also known as stocks or equities, for public trading. Investors can then buy and sell these stocks through brokerage firms or online trading platforms. The stock market enables individuals and institutions to invest in businesses and potentially benefit from their growth and profitability.
How Does Investing In Stocks Work?
Investing in stocks involves buying shares of a company with the expectation that their value will increase over time, allowing you to make a profit. Here’s a general overview of how investing in stocks works:
- Research and Analysis: Start by researching companies and industries you’re interested in. Look for financial information, such as earnings reports, balance sheets, and future growth prospects. Understanding the company’s fundamentals and evaluating its potential for success is essential.
- Choose a Brokerage Account: To invest in stocks, you’ll need a brokerage account. Research different brokerage firms and select one that suits your needs. Consider fees, available investment options, customer service, and user-friendly platforms.
- Fund Your Account: Once you’ve chosen a brokerage, you must fund your account by depositing money. You can transfer funds from your bank account to your brokerage account.
- Place Trades: Using your brokerage’s trading platform or app, you can place buy or sell orders for the stocks you’re interested in. When placing an order, specify the number of shares you want to buy or sell and the price you’re willing to pay.
- Understand and Monitor: Remember that investing in stocks carries risks. Stock prices can fluctuate, and a positive return cannot be guaranteed. It’s important to diversify your portfolio, understand your risk tolerance, and consider consulting with a financial advisor if needed.
Types of Stocks
Stocks can be divided in multiple ways. However, the two main types are common and preferred stocks.
As the name suggests, this is the most common type of stock. Most of the time, this is the type of stock that you will purchase.
The holder of common stock has fractional ownership in the company. This is a stock that can be openly traded on the stock market. While a dividend on common stock is not guaranteed by any means, companies may end up paying dividends on their common stock if they generate excess profits.
Holders of common stock also get to elect the company’s board of directors. In the case of liquidation, common stockholders are usually paid towards the very end.
Preferred stock works in a different manner from common stock. Preferred stock allows stockholders to receive dividend payments on a regular basis. In some cases, stockholders are entitled to always receive payments. In others, they are paid on a priority basis over common stockholders if the company decides to pay a dividend.
However, it is important to remember that preferred stock does not have any voting rights. This is the stock that is usually owned by investors who are looking for passive income.
An ETF is a type of investment fund that is traded on stock exchanges, similar to individual stocks. ETFs are designed to track the performance of a particular index, sector, commodity, or asset class. They offer investors exposure to a diversified portfolio of assets without having to buy each individual security separately.
While ETFs can be a convenient and cost-effective investment vehicle, they still carry risks. The value of an ETF can fluctuate with the underlying assets it holds, and there is no guarantee of investment returns. Before investing in ETFs, it’s advisable to research the specific ETF, its objectives, track record, fees, and risks, and consider your investment goals and risk tolerance.
Good Stocks To Invest In 2023
We hold a pessimistic view on stocks due to our belief that inflation will remain persistent and the Federal Reserve will not implement the interest rate cut that the markets anticipate. As a result, our portfolio is defensively positioned. We currently maintain long positions in financials, as we believe the recent market decline in this sector was excessive. We also like the following sectors:
- Consumer Staples
- Real Estate
This list is accurate as of June 2023. Sign up to Macro Hive Prime for the latest analysis and full details of all our trades.
Best Growth Stocks For The Next Ten Years
Good growth stocks typically exhibit certain characteristics that make them attractive to investors seeking long-term growth potential. Here are some common characteristics of good growth stocks:
- Strong Revenue and Earnings Growth: Growth stocks are associated with companies that demonstrate consistent and strong revenue and earnings growth over time. Look for companies with a track record of increasing sales and profits, indicating their ability to expand their business and generate sustainable growth.
- Market Leadership and Competitive Advantage: Good growth stocks often operate in industries where they have a competitive advantage or a unique position. This could include having innovative products or services, a strong brand, intellectual property rights, or a dominant market share. A competitive advantage allows companies to outperform their peers and maintain growth over the long term.
- Addressable Market Opportunity: Growth stocks are often tied to industries or sectors with significant growth potential. Consider companies operating in expanding markets or disruptive industries, where there is ample room for market share gains and revenue growth. Analyze the size of the addressable market and the company’s ability to capture a meaningful portion of it.
- Innovation and R&D Investment: Companies that prioritize research and development (R&D) and invest in innovation tend to have a higher likelihood of sustained growth. Look for companies that continually develop new products, technologies, or services, as this can provide a competitive edge and help them adapt to evolving market demands.
- Financial Health and Profitability: Good growth stocks should have a solid financial foundation. Assess key financial metrics such as profitability, strong cash flow generation, manageable debt levels, and a healthy balance sheet. A financially healthy company is better equipped to invest in growth initiatives, withstand economic downturns, and seize market opportunities.
- Talented Management Team: A capable and experienced management team is crucial for executing growth strategies effectively. Look for companies with a management team that has a clear vision, a history of successful execution, and a strong alignment of interests with shareholders.
- Valuation Considerations: While growth stocks are often associated with higher valuations due to their growth potential, it’s essential to consider the stock’s valuation relative to its growth prospects. Evaluate valuation metrics such as price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and other relevant measures to ensure the stock is not overvalued.
Remember that investing in growth stocks carries risks, and past performance is not indicative of future results. It’s important to conduct thorough research, diversify your portfolio, and consider your risk tolerance and investment objectives before investing in any specific stocks.