Your Wealth, Health, And Lifestyle Newsletter

Is Now The Time To Invest In The Stock Market?

By Jason Markum
Around the middle of 2008 the financial markets started to wobble. There wasn’t anything wrong per se, but there was a sense of something jittery in the air. People started to whisper amongst themselves, and everyone started to get nervous.

Summer gave way to Autumn and suddenly the housing market in the US collapsed and then the financial sector melted down. Banks started to go bankrupt, investment companies such as Lehman and Merrill folded overnight.

And the stock market plummeted.

2008 ended just about as bad as any year ever did excepting the years of the Great Depression, and 2009 didn’t look to be much better. In fact it wasn’t much better till about half way through it. Then miraculously, almost overnight, the stock market started to rebound.

Where the year before saw the stock market drop 40, 50, 60% or more; suddenly the stock market was rebounding 40, 50, and even 60% or more. It wasn’t a straight shot up, there were flows; ups and downs, but generally the 2009 stock market ended massively higher than anybody expected.

Now 2010 has begun and we’re in the middle to end of January at the time of writing this article. People are beginning to ask the question… is it time to invest in the stock market again?

It’s a very tricky question, and one that is potentially very dangerous. Yes the stock market has gone up massively since the lows of 2008 and beginning of 2009. But that doesn’t necessarily mean that it’s time to invest in the stock market again for us ordinary people.

It seems like whenever the stock market goes up, it soon drops down just as quickly again. The stock market is littered with a history of highs and lows, peaks and troughs, zigs and zags that would make any roller coaster designer envious!

I know it’s hard to stay away from the stock market when it’s shooting up so quickly but I advise caution at the moment. Why is that? Well I’ve got a very specific reason…

When the economy tanked towards the end of 2008 and early 2009 the government acted swiftly by pumping billions, even trillions of dollars into the financial system in various ways. That money took a few months to filter through the system as it always does, which leads us to the middle of 2009 and a quickly increasing stock market.

2009 is over, and the government has stopped – at least to a large degree – pumping money into the system, which could mean the stock market will stop rising. In fact, without government intervention the stock market may not be able to hold onto the gains it received last year.

If that is the case, then we can expect a sharp decrease in the value of the stock market throughout 2010 until the recession is well past us… which does not look to be the case at the moment. For that reason I suggest, at least for the time being, that you keep your money out of the stock market.

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