What is actually moving the market?

During last weeks, markets have been moving significantly. This phenomena is called volatility and is due to a combination of multiple factors. The mainstream media always mentions the same issues such as inflation or rising interest rates. The fact is that they always forget to mention that these issues are caused by malfunctioning political and economic policies during last decades.

May 24, 2022
Economics and Finance

We all noticed that everything around us becomes more expensive and it seems like there is nothing that we can do about this. If we use the philosophy of a green investor to look deeper into this problem, we notice that there are multiple issues that could have been avoided.  

1.    Belgium could have produced more domestically instead of being dependent from foreign countries. The impact on the gas prices for example, could have been avoided by more in-house green energy.

2.    Monetary policies stimulated low/negative interest rates which has led to increasing government debt with insufficient positive effects for the population. As you see on the chart below, the ECB has been printing money exponentially. This stimulated higher prices as our currency loses value.

3.    Lack of regulations for trading platforms stimulated unexperienced people to access investment markets without protection. This gives financial institutions a significant advantage against small retail investors without capitals or experience.  

Graph:Euro Area Money Supply M1

Now that we are in this situation, it’s important to know how to react with your portfolio. People are currently facing a lot of fear and we can observe the same sentiment on the markets. The S&P500(index 500 US companies) is down 20% since his highest point. It is not easy to determine interesting entry prices as people can never know when prices will stop to drop. Investors should use these moments to assess their investment strategy and prepare themselves for the next upward trend.

When you invest for the long run, you will encounter periods of glory and periods of crisis. Investors need an investment plan based on objective criteria to prepare themselves for difficult situations where they often do not know what to do. It also allows you to select price levels where you will take your profit and sell (part of) your investments. There is no perfect investment strategy, but at Green investor, we can help you to build a good investment strategy that fits your personality.

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