Investors are being challenged by the stock market that is slowly leveling down when it comes to the bull market. Investors are unsure of how long this steady rise in prices will possibly last. Wall Street professionals believe that the bull market is now entering its last and final phase of glory.
The challenge here is to take advantage of this aging market. Grab the bull by its horn, literally.
The trend is that as a bull market nears the final stages, there will be rising economic growth as well as inflation. The gradual decline in growth is marked by a hike in interest rates.
In such a scenario, experts have suggested certain investments that are thought to work better than the others.
How to take advantage of the aging bull market
Stock market professionals have advised investors to consider history while investing Some sectors have better growth rates in the last stages of the bull market than others and these are the markets that are to be considered.
With inflation on the rise, short-term rates and borrowing costs are on the rise because of which analysts have suggested investors steer clear of the rate-sensitive stocks as these could do more harm than good when it comes to the return on investment.
History says that in such a scenario, sectors like electricity providers are the worst performers.
Also, another key takeaway is that since the economy is faring well in terms of growth, the nation has happy consumers and the consumer discretionary sector is expected to perform quite well.
In the final stages of a bull market, the unemployment rate is relatively low and it is a good time for consumers to purchase discretionary stocks like gold, cars, and furniture.
Experts have warned investors to be wary of spikes in volatility as the market moves forward and it is important to analyze how a particular stock has performed in the long run.
In addition, changes in policies by President Trump are also affecting the bull market. Tax cuts and the proposed tariffs on steel and aluminum imports play a role in determining the volatility of stocks.
Small company stocks stand to perform better in such an environment as compared to other stocks. These stocks are exclusively traded in the U.S. and will suffer much less of an impact should a global trade war break out.
Analysts have also stated that investors should always be prepared for a recession. The last recession was nine years ago and there are chances that as the bull market reaches the final stages, the economy will begin to feel contractions.