It has been a while since our last newsletter and a lot has been happening within the stock markets. There has been an increase in the amount of volatility due to concerns about rising interest rates and the ongoing Greece financial crisis. The question is what should we as investors do as the markets move up and down? First of all we need to review our portfolio and determine how our stocks have performed over the last quarter. Ask ourselves is it time to add more shares to stocks we already own since their prices may have dropped or do we take some profits. As long as we keep informed with our companies’ stock price, news, sales and earnings growth we will be able to decide what to do. There are always going to be news related to the stock markets which are going to cause either new markets highs or a drop in stock prices.
Why do we buy or sell a stock? We buy a stock which we have done due diligent research which tells us to buy the stock in a certain price range. We sell a stock when we need the money and want to benefit from the price appreciation of a stock or we sell a stock because we have determined a stock has no longer met our growth or performance criteria. Should we be concerned how the rest of the world is doing? Of course we do, we always need to read the news and understand how a crisis will affect the stock markets and our portfolio. For example the Greece crisis is affecting U.S. Investors investments, due to the concern that global credit markets could weaken the U.S. economy even though the U.S banks have limited exposure to Greece. Greece is $300 billion dollars in debt and has defaulted on debt payments and needs a bailout.
Other examples are the Federal Reserve chair women Janet Yellen and China. First we will mention Janet Yellen. She is the chairwoman who represents the Federal Reserve and reports to everyone if and when there is going to be an interest rate hike. Since the U.S. unemployment rate is improving along with other indicators, this signifies the economy is starting to grow. The Federal Reserve will decide to raise rates to keep inflation in check but economists are speculating an interest rate hike will be delayed due to the Greece Crisis and the China stock market.
In the world of finance you will always hear or read about the China stock market or the China economy. The China stock market is now down 20 percent which is a loss of 3 trillion dollars. The reason why China is so important to U.S. stocks is U.S companies rely on China to purchase U.S. products. Another issue is the price of oil per barrel is down below 50 dollars a barrel which is good for Americans at the pump but is hurting big oil companies earnings.
Investors need to stay their course and buy stocks at good prices which during a volatile market are usually the time to buy good company stocks cheap.
Good luck and happy investing from CFE finances, we will be in touch with another newsletter soon. If you have any questions or concerns, please email us from our contact page.