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The Stock Market

The stock market continues to be the way to go when investing for the future, especially for retirement. The reason is because stocks usually do better as an investment than treasury bills, bonds, and other investment vehicles.

Due to economic or political occurrences in the United States and within other countries around the world, the stock market can be volatile at times, with stock prices rising or falling on a daily basis.

When the economy goes through periods of recession with instability and uncertainty, stock prices tend to go down causing investors to panic and sell. This causes a ripple effect all around the world.

If there is not a correction brought on by natural market conditions, or by the intervention of the Federal Reserve Board and/or other governmental agencies, further drops in the price of stocks will occur.

With that said, an investment in stocks is still considered a smart move by most economists. Over the years, especially during periods of economic inflation, stock prices have risen substantially and those who invested have reaped positive rewards.

In years past, the economy has chugged along at a steady pace and investors have enjoyed the ride. Conditions have been ideal for the stock market due to low interest rates, high growth in the economy, low unemployment figures, and relatively low inflation.

But recently, prices of homes, gas, food, and other day to day staples have skyrocketed. The Federal Reserve instituted interest rate increases to slow inflation, which worked, but may have worked too well.

By raising interest rates, the economy cooled down sending the economy into a recession and causing many investors to pause and consider their options if the slowdown makes it necessary to liquidate their stock portfolios or to divest their holdings and put them into safer investment vehicles.

Most economists believe that we are in the beginning stages of what might become a long period of recession, making the stock market vulnerable. But the Federal Reserve Board has lowered interest rates to combat the recession, thereby calming the fears, at least for now, of those who have invested heavily in stock.

Although these fears have merit, economist caution against panic. History has shown that when the stock market goes through a downturn, in time, it usually makes a stronger rebound.

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