Well my personal opinion is that despite the strength in recent weeks, it’s far too early to start throwing your money back into stocks. The stock markets are fairly valued right now in my opinion and so there’s little value to be had in any of the major stock market listed companies.
To some extent the fact that the major stock market indices such as the FTSE 100 and the Dow Jones are trading so high, suggests that any economic recovery that we may see in the coming months is already priced into the markets.
There’s no doubt that the economy will be a lot stronger at some point in the next few years, so as a consequence of this the world’s major stock markets will probably be trading much higher than they are at the present time. However if you are investing in shares for the long-term you really want to be putting your money into stocks when they are undervalued.
This is determined by looking at things like price/earnings ratios and the ratio of market capitalization to profits. You want to invest in stocks that are undervalued according to present and historic data. Unfortunately the the recent stock markets rallies has increased the price of many of the major listed companies.
Therefore it may be a good idea to either wait for a possible sell-off so many shares are a lot better value, or invest in some of the smaller companies that are not so directly impacted to the movements of the wider stock market.
With regards to the first point, a market correction certainly cannot be ruled out because we have risen far higher than many experts were predicting, and so a bout of profit taking could well be imminent.
Small-cap stocks probably offer a little more value right now because there will always be a few bargains to be had. The only trouble is that in tough trading conditions, like the ones we are experiencing at the moment, these fledgling companies are very high risk investments because very few of them come through a recession unscathed.
So in summary I would say that your best bet is to invest in good quality companies that have an established record of earnings and dividend growth. However I don’t necessarily think now is a great time to invest because I think the markets will probably fall back once more before we start to see a meaningful market rally (this is only my opinion and does not represent financial advice).
A better idea may be to concentrate on short-term trading instead. Whatever you do, it’s important that you keep up with all the latest online trading news and all the latest economic announcements in order to help you predict where the markets may be headed in the foreseeable future.
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