When Markets Are This Hot, Should You Jump In?
Here’s how the underinvested decide whether to join a rally that has already met some forecasts for the year or wait for more attractive entry points.
Two different economic scenarios are competing for investors' decision-making.
Photographer: Michael M. Santiago/Getty Images
The traditional favorable start to financial markets in 2023, due to investor fund inflows that typically accompany the new year, has been turbocharged by data pointing to a greater possibility of a soft landing for the US economy and, most recently, the signals coming out of the Federal Reserve. The generalized price rally has been so quick and so big for both stocks and bonds that it raises an interesting question for underinvested investors who have not yet put their money to work. What they should do correlates closely, but not entirely, to their economic and policy views.
Most of the recent macroeconomic data have been better than consensus forecasts. The resulting mix of declining inflation indicators and less worrisome growth developments has tipped the balance of risks somewhat more toward a soft landing and away from the hard landing characterized by a recession or stagnation.