With so much uncertainty in the markets due to the COVID-19 pandemic, it can be hard to know what to do with your money. Should you invest now? It depends on your risk tolerance and investing goals. Cruise ship stocks have rallied since the start of 2023, but does that mean now is the time to buy? The last few years have been absolutely brutal, and the markets are still volatile.
Investing in stocks, bonds, and other assets can be a great way to build wealth over the long run. But if an economic downturn is looming, is it safe to invest right now? Here's what history says.
What History Shows About Recessions
Recessions have been a part of the economic cycle since the beginning of time. They are unpredictable, but they also don't last forever. In fact, history shows that recessions are typically followed by periods of rapid growth. That means that, if you can stomach the risk, investing now may still be a good idea.
The last recession ended in 2021, and the U.S. economy is now in its tenth year of expansion. But there are still signs that the economy is slowing down. The Bloomberg U.S. Aggregate Bond Index — a proxy for the broad U.S. bond market — posted a 13% loss in 2022, which, by itself, wouldn't be all that bad. But when combined with other signs of a slowing economy, it could be a sign that a recession is on the horizon.
Factors That Make Investing Now Attractive
Despite the risk, there are some factors that make investing now attractive. Interest rates are at an all-time low, making it easier to borrow money to invest. And with interest rates high, high-yield savings accounts and CDs are becoming more attractive options for short-term goals. However, over the long run, stocks are still the best way to build wealth.
Warren Buffett famously said, “Don't try to predict the market.” Buffett explained in his most recent letter to shareholders that the stock market is unpredictable and volatile, so it’s best to stay invested for the long haul. If you were to invest $10,000 right now and made no additional contributions, that money would grow into more than $281,000 over 35 years, assuming a 7% annual return. That’s a huge return on your investment.
Which Stocks to Buy Now
Although it’s impossible to predict the future, there are some stocks that look like good bets now. Bank OZK is one of them. This bank is well-capitalized, with a strong balance sheet and high dividend yields. It also has a long history of growth, so it’s a solid long-term investment.
Microsoft is another stock that has been performing well this year. The stock has lagged the tech-heavy Nasdaq Composite this year because of concerns around Microsoft's big investment in OpenAI, the company’s artificial intelligence subsidiary. But Microsoft is still a great stock to own for the long run, and it could be set to surge in the coming months.
Finally, Johnson & Johnson is another stock that should reward long-term investors. This healthcare giant is one of the most stable stocks in the market and has a long history of dividend growth. And it looks like the stock is still undervalued, making it a great buy right now.
Conclusion
The stock market can be a volatile place, and there’s no way to predict where it will go in the future. But if you’re patient and willing to ride out the ups and downs, investing now could be a great way to build wealth over the long run. Factors like low interest rates and strong balance sheets on certain stocks make investing now attractive. So if you’ve been thinking about investing, now may be a great time to do it.
