The past few years have been rather rough in the financial markets. Or have they? Despite all the doom and gloom reported in the media and the lacklustre data like jobs and GDP figures, the major US stock markets actually rose in 2009 and 2010, marking two straight years of growth – not what you would expect if the economy was as bad as everyone thinks.
Its A GOOD Time To Start Trading Penny Stocks!
In fact, now is still a great time to get in to the penny stock market while shares are undervalued and new entrepreneurs come to the market. In this article we give you three great reasons why you should be investing in shares right now.
Bonds vs Stocks
During times of uncertainty, Government bonds represent a safe haven for institutional investors – the financial powerhouses with the big money to invest. Just because there is a recession doesnt mean there isnt any less money, but people become more conservative in their investments and put it in to securities that are safe rather than drive economic growth. In December 2010 the gap between money invested in bonds and money invested in stocks finally opened up for the first time since 2008. This is a major sign that investors have rediscovered their risk appetite and are looking for growth rather than security. The increased investment in the stock market helps companies grow, which in turn helps the economy to grow.
Corporate Earnings Are Strong
Once again, the media is still trying to push the gloom story, but corporate earnings completely contradict this. In fact, average corporate earnings have increased by 20% since last year which are some of the biggest increases ever seen. Revenue is at or in some cases even surpassed what was being made pre-crisis. Given the rise in earnings, stock prices remain relatively cheap with the price-to-earnings ratio for the S&P 500 index stocks at just 16, compared to the historical average of 23. That means there is a lot of room for share price growth in the coming years, not just on the major indices, but for the penny stocks too who will benefit from a growing economy.
Asia Is Booming
Despite what the media is telling you, the global economy isnt as fragile as you might think. Asia is still recording growth and that is helping to drive the American and Western economies as the new rich buy luxury products like BMW, fashion brands and even private jets. Apple, Dell and many other companies are all reporting record earnings in emerging markets like China, India and Malaysia. All this money comes back to America to support American jobs and could even drive a new merger and acquisitions boom where large companies have stockpiles of cash and are looking to invest it in small, innovative companies.
The media is still fixated on the financial crisis, but the truth is the markets have moved on and are once again posting profits and doing what companies do best: make money trading penny stocks