The last few weeks have been extremely erratic for the global financial markets. But is the recent decline slowing down or just pausing before continuing to slide? What does it mean, more crucially, for wise investors in tiny stocks?
Recently, Wall Street had its worst week of the year, and stock markets throughout the world experienced sharp declines due to worries about rising interest rates and decreasing GDP. The Dow Jones industrial average has decreased roughly 6.5% from a six-year high, attained on May 10, 2006, after increasing by about 9% in the first four months of the year.
Because penny stock holders worry that the Fed will be so preoccupied with containing inflation that it would disregard warning signals of an impending economic slowdown, hike interest rates excessively, and plunge the country into a recession, stocks have been suffering.
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Last week, the U.S. Federal Reserve Chairman, Ben Bernanke, startled penny stock investors by announcing that the Fed will keep hiking interest rates to keep inflation under control. This threw the world stock markets into a tailspin.
And the penny stock market will be directly impacted by that choice. Because investors think higher interest rates will slow down business profits and economic growth, this has a negative impact on penny stock values.
However, why is inflation escalating? higher expenses for energy. As the hurricane season has officially begun, traders and penny stock investors are also concerned that Gulf Coast refineries and oil production facilities may sustain damage once more this summer and into the fall.
A rise in interest rates also has the potential to impact the entire economy. Credit card finance fees will increase. A softer property market and increased pressure on home buyers will result from rising mortgage and home equity loan rates. In the end, borrowing money for expansion will be more expensive.
But does this portend doom and gloom for the market for penny stocks? On the contrary. Despite the enormous urge to sell everything, some see this as a tremendous opportunity. "I wouldn't be making a sale. I'm more likely to buy, "a New York expert stated.
What makes this a chance, then? Unexpectedly, many businesses hurt by the market's downward trend are now less expensive than they were a few weeks ago. A wonderful strategy to make money over the long term is to purchase a great penny stock when it has been devalued, as any seasoned penny stock investor will tell you.
If you can handle some of the turbulence, that is. The unpredictable nature of the market may be tough for many blue chip investors to handle, but this is to be expected.
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So, "snap out of it," a second observer said. After a month of frantic selling, the markets are now in a desirable range. Could there be further market declines? Absolutely. After all, there are no surefire penny stocks. Stocks are far less expensive now than they were two months ago, though, so that much is certain.
We’ve seen that the market is on an upward trajectory and penny stocks are offering great opportunities. As always, I suggest that you do your own research and due diligence when considering any investment. If you can handle the risks associated with penny stocks, then now could be a good time to start investing in them. Good luck!
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