Tuesday, February 13, 2018

The Volatility in the Stock Market is likely not over

Why?

Because Bonds are one reason. Because people who might have borrowed money to invest could be dealing with some real problems right now especially if they didn't have "Automatic Sell" triggers in place so their stocks would be automatically sold when reaching a price they specify.

However, long term investors (if they bought in at a low enough price) are going to stay in in case the market after zig zagging decides to start moving up more regularly once again.

A Long Term investor is in for the long haul of 1, 5, 10, 20 or even 50 years owning some stocks. Every time you sell you have to pay capital gains tax (unless you reinvest that money within a certain time period). And whenever you sell a stock that costs a little too on top of that. So, all these things have to be strategized into whatever strategy you are following or creating custom made for yourselves along the way.

Because inflation is heating up people might want to invest in municipal bonds more now which will tend to drain money out of the stock market which will also inevitably drop stock prices. When money is cheap to borrow this is the most likely time for the stock market to be high. When there is inflation beginning partly caused by Trump's tax bill it is going to cause the stock market to drop because the economy has become "overheated" to the point where wages are increasing at a rate of almost 3% a year. This then creates inflation which is not good for stock market prices either.

Though it must also be known that wages rising is really good for the average wage earner even though it will also cause inflation which means gas and food and everything is also going to cost more than it does now too.

So, the people most affected are on fixed incomes who cannot easily absorb the inflation caused by Trump's tax bill. So, people disabled and retired will have a harder time because of Trump's tax bill overheating the economy.

Plus the incredible deficits caused by the tax bill are going to make borrowing money much much more expensive for everyone (including our government) from now on as long as the Tax laws from the bill are in place.

I fully expect democrats to repeal most parts of the tax bill and hopefully to re-establish a sane and balanced budget once again after the fall 2018 elections.

However,  people on fixed incomes also can invest in municipal bonds or CDs at higher interest rates which might help them be in safer investments which is important for people on fixed incomes to be invested in safe investments that likely will stay stable in most cases except for nuclear war or weather calamity caused by Global Warming or Global Climate changes.

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