The stock market is a way to invest in companies and businesses. Stocks are ownership claims on a business and can include a variety of different types of securities that are listed on the public stock exchange. A stock may be worth several hundred dollars or many thousands of dollars. The market can be very confusing and volatile, so it’s best to know the basics before you jump in.
The markets have been down this week after the Federal Reserve raised interest rates for the first time in over four years. This report is an important one for investors, as the data will likely give them a better picture of inflation. The Fed also plans to continue to raise rates through the end of 2022 while trimming its $9 trillion balance sheet. This is causing investors to worry about a recession.
During recessions, it is important to stay active and build a strong watchlist. Look for stocks that are contracting less than the major indexes and are gaining relative strength. This can be a great way to make money during this time. But remember that investing in stocks during a recession is risky. It can lead to a loss, so be sure to keep an emergency reserve in your portfolio.
The stock market is also prone to sharp price rallies and declines. The S&P 500 (r) Index fell below twenty percent last week, but is still slightly above its June low. The pullback is a reflection of renewed worries about the economy and inflation. Investors are also concerned about the Fed’s stance on rates, which was hawkish last week.
