Change in Market Sentiment

Source: Pinterest

I am here to share my overall observation in regards to the change in US market and key areas that we should take note of.

The question we often asked ourselves would be "will the bulls ever come back to the market?" The short answer to your question is yes but when. Nobody is sure as there are uncertainty in the market.

The overall health of $NASDAQ(.IXIC)$has not been very optimistic due to the fear of war between Russia and Ukraine, rising of interest rate by Federal which led to decreasing in consumer purchasing power.

Instead or looking to "find the bottom of stock" which is often very difficult as this method requires you to "time the market" because no one could time the market perfectly.

Let's dive look into something more practical while asking myself on how can I prevent myself in becoming a victim of catching a falling knife?

Thus, I am here to share my key takeaway that I have gathered and I am excited to share with you all.

Consumer usage patterns

It is important for investor's to understand on what is the current consumer usage patterns as this allows investors to have a competitive advantage when investing in relevant stock. I will be sharing an example of $Zoom(ZM)$which is currently an growth stock to illustrate on what I meant.

Zoom was a great business model to begin with during the pre-covid peak. Zoom stock was well-liked by many investor's and catalyst. 

Zoom platform allows consumer to interact with one another around the world. Zoom has also created added on feature to make the video call more interesting which has shared joy in the user mind-set while they are using this platform. 

Zoom is commonly use for working from home where consumer can interact with colleagues without the need of heading to the office due to the covid pandemic. 

However, is it sustainable in the long run? Short term yes, long term I would say not really.

With the easing of covid measure, children would eventually need to head back to school while working adults are heading back to work while countries border would slowly re-open.

So how does this affect an growth stock like Zoom. Having said that, active daily user in Zoom would decrease along the way as time goes. 

The example does not just illustrate on Zoom but to other growth stock for example: Facebook, Pinterest or even Netflix. Company fundamentals has not changed by consumer usage patterns has changed.

How can companies overcome this issue?

It could be in many form. For example, acquiring of new companies or creating new marketing strategy to overcome the current existing ones. Companies must not be stegant for too long by using the same product that they had.

The reason being is that we are in a ever changing market when consumer changing pattern changed quickly as time goes so companies or businesses would need to understand and adapt to new changes.

I do understand that by doing research to invest in companies might be taxing for some investor, another opportunity that you could look at would be investing in "safety stock" instead of "growth stock" as I will be sharing some of the example of safety stock and defining the differences between them and how the stock prices move.

Example of safety stock

1. Apple (ticker symbol: AAPL)

2. Bershire Hathaway (ticker symbol: BRK.B)

3. Coca-Cola (ticker symbol: KO)

Defination of "safe stock" & "growth stock"

Safe stock: price of stock does not fluctuate as much, lesser returns (lower risk tolerance)

Growth stock: price of stock fluctuate faster, higher returns (higher risk tolerance)

If your objective is to generate your cash flow at a more steadily pace in regardless of a bearish market, safe stock could the way to go. 

However, if your objective is to generate higher cash flow, growth stock could be one of the candidate to look at but due to growth stock has been downward trending thus it might not be a wise move to invested right now since indexes has no clear correction yet.

Always remember that the trend is always your best friend and that time in the market is better then trying to the the market.

Disclaimer: Do note that this is not financial advice, do your own due diligence in researching in companies that suit your best needs.