We are near the bottom of the bear market. Pessimism in the markets peaked, and we can begin to see optimism show its lovely face.
But we still have time to make some life-changing moves while prices are excellent and everyone focuses on surviving.
To invest wisely during a bear market and recession, we must predict (to the best of our abilities) the trends that will occur during the next bull market.
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Every bull market is different; whether it be tulips, dot.coms, housing, or stimulus money, we will not know the catalyst for the next bull until after it happens.
Get past the struggle. Are you struggling financially? That tends to happen to most people during a recession.
This one is different because the job market is hot, at least for middle-wage workers. However, movements like quiet quitting and the great resignation have people focusing on the wrong ideals.
We must be in a strong financial position to prepare for the next bull market. We should have already started a small business, created content, bought stocks and bonds, and rented rooms.
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Taking these measures ensures we make more money than ever while keeping an eye on the various markets (cryptocurrencies, stocks, bonds, commodities, housing).
The catalyst for the next bull market. We don’t know what will trigger the next bull market. It could be the end of a war or a new president.
As investors, we need to prepare for the bull market by predicting the results of the catalyst. In this case, when the Federal Reserve lowers interest rates, the markets will respond in kind.
Also, as solid inflation numbers start to show a deceleration in price growth, the markets will rejoice. That means that higher interest rates will be a thing of the past.
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We don’t know the timeline for these few things to occur, but they will happen over the next 2-3 years. The federal government simply cannot afford to keep interest rates this high because of its debt burden.
Time to position yourself for the ride up. Now, for the meat of the article—positioning. Investors understand how to build their portfolios for maximum profits during a bull market.
For example, real estate investors who bought distressed homes in 2009 are now sitting on millions of dollars of properties.
They bought during the hardest times, looking through a lens from the future. When everything was bleak, they decided to buy and hold.
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If we are at the bottom now, what assets should we buy that will give us out-sized returns? Let’s take a look around the markets.
Real estate is not so hot. Prices in real estate didn’t drop as many people predicted. I knew that there were just too many investors waiting for a price drop.
Real estate is always a good asset class to buy and own, but there will not be out-sized returns over the next 5-10 years.
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Prices are already high, and rents are even higher. Unless you can buy a distressed property 50% under market value, middle-class investors will find the housing market challenging.
However, there has never been a better time to rent a room. People are disparate, and rents are sky-high. My general rule of thumb is that you can rent your master suite for 50% of your entire home rentals.
So if your home can rent for $3,000, you can rent your master for $1,500. If you are willing to rent rooms, you can generate enough cash flow to make some moves.
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Bonds for the win. With rising interest rates, bonds took the worst beating in recent history. If you owned bonds with 2% coupons, interest rates over 4% destroyed your bond prices.
However, if you buy bonds at 4% and interest rates decrease to 2%, you are the year’s winner. Therefore, I am buying as many bonds as possible.
This also goes for mortgage-backed securities. With mortgage rates over 6%, REITs like AGNC and NLY are purchasing massive yields.
When mortgage rates drop to 3-4%, those 6-7% yielding MBS will produce excellent capital gains. Position your portfolio to take advantage of decreasing Federal Fund rates.
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Stock will recover, as always. There are two types of stocks, those that pay dividends and those that don’t.
Now is the perfect time to buy dividend-paying stocks because of higher yields. However, it will take a lot of work to find good yields on blue-chip stocks during the bull market.
For example, Altria (MO) currently yields roughly 8.3%. During a bull market, prices will increase when everyone is chasing the same yields. Therefore, MO will probably deliver 5.5% to 6%.
Growth stocks (index fund QQQ) will make a massive comeback. However, they may not be the same high-flyers as last time (2020).
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Stocks like Google (GOOG), Apple (APPL), Tesla (TSLA), and Microsoft (MFST) are always good to own.
Facebook (META) is betting on the metaverse, which could pay off during the bull market. Programs like Chat GPT are changing how we view and interact with artificial intelligence.
I speculated on a few low-priced stocks (under $5); my current favorites are Sofi Technologies (SOFI) and Douglas Elliman (DOUG).
Will crypto stage a comeback? Yes, cryptocurrencies will make a massive comeback—this time in a much safer, lower-yielding format.
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The most challenging part of the crypto comeback is finding companies you can trust. Most of us got burned by various organizations (mine was Voyager) that over-leveraged themselves and folded.
Right now, I trust M1 Finance (affiliate link) to operate above the greed. I have a small pot of money in crypto over there and will try to add some more over the next six months.
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Conclusion. 2023 is looking to be a good year for those who are preparing for the future. If you are struggling, it’s time to tighten your belt and budget, save, and invest.
It’s a good view from the bottom currently, and we can look to the future with cash in hand. Don’t miss this bull run because of debt and liabilities.
The last bull market lasted over 13 years, and it was tough to find any good deals. We don’t know the catalyst for the next bull run, but it will price most folks out of the game. Be an investor, not a watcher. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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