October 22, 2022

Now that a lot of great stocks in the market have come down to bargain levels, the question on top of many people's minds is...
How do I know the market is recovering?
As far as the U.S. market is concerned, there are 5 things we look at.
1. Inflation related indicators continue to trend down.

2. Employment rate rise higher than what is expected

A high employment rate is an indicator that the economy is healthy and in recovery as it means that businesses are employing and doing well.

3. Consumer sentiment is on the recovery

Consumer sentiment measures how consumers view the prospects of their own financial situation, the general economy over the near and long term. A higher rating is a sign that the consumers are optimistic.

4. Commodity prices

The current inflation is induced by the rise in commodity prices, largely caused by the supply shortage as a result of the Russia-Ukraine war.  Once we see the prices for commodities like wheat, iron, natural gas, nickel, coal, crude oil going on a down trend, that will be the sign that the inflation is easing.

5. The U.S. Central bank no longer aggressive in increasing interest rate

Interest rates are used as a tool to restore price stability in the economy. When the U.S. central bank is less aggressive in increasing interest rates, it is a sign that the Fed thinks inflation is slowing.

Above are the 5 categories of indicators we look at, with some examples.

Finally, one very important indicator is that - the market stops reacting to further negative news (e.g. interest rate increase, break-out wars in Russia or Ukraine).  That will mean the market has already reach the level where the big fund management institutions are left with positions they want to hold.

The BIG idea is...

When "all stars align", i.e. when all the indicators above go in a favorable direction, that will be the sign that the economy is recovering.

One important thing to note is that the stock market is 6 to 9 months ahead of the economy.

So when all the indicators align, the market would have been moving up already.
From the charts above, we can see that some of the categories are already starting to show positive signs.

So how are you anticipating the recovery?
Do you have a strategy to identify which are the stocks that have strong potential for growth after the recovery?
Do you know how to filter out companies that will not recover well from the impact of the recession?

As an investor and trader - this is the most important season  as we prepare ourselves and look forward to the recovery - just like what farmers do during winter months in the U.S.

Winter is  one of the most important times for planning, repairing machineries, buying seeds etc, it's actually a busy season for them so that they can have a smooth year of planting and harvest ahead!

So, be a wise investor and trader, join us in our next webinar to find out how you can prepare yourself for the recovery. Click on the link below to register for our next session.


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