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05.07.2022 07:08 AM
Investors continue to get rid of American stocks.

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As we have frequently stated in our previous writings comparing the monetary policies of the ECB and the Fed, the American market and economy currently appear far more attractive than the European market and economy. Given these facts, it would be reasonable to anticipate that the US stock market will increase, presuming a capital inflow from Europe. The US stock market is currently seeing almost its steepest loss in history, though. Where does the money go, and why is this happening? Large investors are not likely to remove money from various assets and store it under their pillows. When discussing the transfer of capital from one nation to another, it is important to remember the particular risky assets. Bonds and bank deposits have long been seen as low-risk investments, while stocks have always been regarded as high-risk investments. Investors are running away from risky assets as several central banks worldwide are raising interest rates. Again, one could infer that since the ECB does not hike the rate, it is illogical for them to flee European markets. However, the shares of any market are not a priority for traders right now since investors think that sooner or later, the European Central Bank will start doing this sooner or later. I don't even want to bring up the market for cryptocurrencies. It drops two to three times faster than the stock market because cryptocurrencies are a riskier investment than stocks. As a result, investors are avoiding equities and cryptocurrencies, but where should they put their money instead?

There are various choices available. These are good old bonds. In the United States, the bond yield already surpasses three percent, and this income is guaranteed. Government guarantees for bond profitability and repayment mean their value cannot decrease. It is the ideal instrument for saving money as a result. What about the profit, though? After all, investors go into the markets hoping to profit from them. This is not accurate because, as Warren Buffett has stated numerous times, conserving money comes before making a profit when investing. If a result, as the stock or cryptocurrency market expands, investors have the chance to not only preserve their capital but also turn a profit without actually doing anything. Naturally, investors remove their money when these markets decline and shift back to their original objective of capital preservation. Second, numerous more uncommon investing strategies, from art pieces and collectibles to real estate, are constantly appreciated. A central New York apartment, for instance, is unlikely to become less expensive since it is a rare asset and because central New York will no longer exist and cannot support the construction of any number of structures. Picasso's picture is unique and one of a kind. It won't get any cheaper either. As a result, there are several opportunities available where you can invest your money without worrying about its worth decreasing.

Paolo Greco,
Analytical expert of InstaForex
© 2007-2024
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