On the worldwide stock markets, the last couple of weeks have been particularly wild and woolly. The question now is whether the recent decline has come to an end…or whether it is simply taking a break before plunging again. And, perhaps more significantly, what does it imply for savvy penny stock investors in general?
Wall Street just suffered through its worst week of the year, with global stock markets plummeting significantly as investors fretted about increasing interest rates and slowing GDP, among other issues. Since reaching a six-year high on May 10, 2006, after increasing by over 9 percent in the first four months of the year, the Dow Jones industrial average has dropped by around 6.5 percent.
In part, stocks have suffered because penny stock investors are concerned that the Federal Reserve would become so fixated on inflation that it will disregard signals of an economic downturn, raising interest rates to unsustainable levels and sending the country into a recession.
A Spiraling Market and Rising Penny Stock Opportunities
The world’s stock markets were sent into a tailspin last week when Ben Bernanke, the fluent-speaking chairman of the Federal Reserve in the United States, stunned penny stock investors by stating that the Fed will continue to raise interest rates in order to keep inflation under control.
And the outcome of this judgment will have a direct influence on the penny–stock market. Higher interest rates have a negative impact on penny stock values because investors fear that they will stifle economic development and business profit growth in the future.
But why is inflation escalating in the first place? Costs of energy are increasing. A second source of concern for traders and penny stock investors is that, with the start of the hurricane season officially underway, Gulf Coast refineries and oil production facilities might be destroyed again this summer and fall.
Furthermore, increased interest rates have the potential to have an impact on the whole economy. Finance costs on credit cards will increase in the future. Rates on mortgages and home equity loans will rise as well, placing further pressure on homebuyers and contributing to a slowing housing market. In the end, borrowing money for expansion will be more expensive.
Do these developments herald doom and gloom for the penny stock market, however? On the contrary, in fact. The desire to sell everything might be overpowering for some, but for others, this represents an excellent opportunity. “I would not be selling my property. I would lean toward purchasing “According to one New York-based expert.
So, what precisely is this “opportunity” about? It just so happens that many firms caught up in the market’s downward spiral are currently trading at a discount to where they were just a few of weeks ago. Moreover, as any seasoned penny stock investor will tell you, purchasing a fantastic penny stock when it has been battered down is not a terrible way to earn money over the long term.
That is, if you are able to withstand some of the volatility. While many blue chip investors are having trouble dealing with the market’s volatility, this is standard operating procedure.
In order to “snap out of it,” another observer advised. After a month of frantic selling, the markets have settled into a more appealing trading range. Is it possible that the markets will continue to fall? Absolutely. After all, there is no such thing as a guaranteed thing in the world of penny stocks. There is, however, one thing that is certain: “Stocks are significantly cheaper now than they were two months ago.”