The global stock markets are in turmoil FTSE 100 decreased by 6.6% in August, and there is a growing talk of a looming recession.
In the US there is talk of an inverted yield curve, which means that the yields on short-term bonds are higher than on longer-term bonds. This is often seen as a recession indicator and occurred on Wednesday when ten-year US Treasury yields fell below the two-year yield for the first time since the banking crisis.
We have an escalating trade war between Donald Trump and China, leaving here in the UK, news about the economic decline of Germany's power plant in the EU … even the price of oil has fallen back below $ 60 a barrel. Investors are getting nervous and selling, but I say they are wrong.
There is no doubt that the banking crisis has caused a great deal of pain, including the end of cheap credit, job losses, weaker salaries, and the decline in the purchasing power of many people who have hit hard on the main street. But, you know what? The FTSE 100 is now well ahead of the crisis, with most stocks making up for their short-term losses and a few more, and it was a brilliant buying period for investors.
Economic instability may panic the big institutional investors, but we private investors can use them to make some very good bargains to boost our investment plans.
If you had managed to buy Royal Dutch seashell stocks in the depths of stock markets in february 2009, they would now be sitting on a 52% gain (though we've been through an oil price crisis in the meantime) and they would have been close to doubling that when dividends are added.
If you have invested in a stock that is considered super safe, Unileveryou would have more than tripled your money. And AstraZenecaIf you had recovered from the problems associated with losing some key patents and investing heavily in the development pipeline, your money would have tripled. And you would have even won with most banks, with Royal Bank of Scotland the only loser. Also worried Lloyds has risen 28% (and has paid ordinary dividends).
In fact, the FTSE 100 has risen by 85% since the crash and dividend yields have risen. The predicted return on the index for 2019 is now 4.5%. You should be able to achieve a better return by selecting only high-dividend stocks and ignoring low-dividend and low-dividend stocks.
Right now I have some cash in my SIPP and I hold myself back and identify stocks with high dividends, which I think will become even cheaper.
Taylor Wimpey Equities are on a projected dividend yield of 12%, SSE is at 7.5%, Standard Life Aberdeen offers 8.7%, and there are many more big ones. These are all projected returns that can not be guaranteed. However, they are a good indication of the Footsie stock's performance.
The important thing is to stay cool. Remember that investing in equities is a long-term business and should take place with a time horizon of at least 10 years. Do not follow the institutional investors, who focus on their short-term, quarterly investments. Quarterly results. There could be some great shopping for us.
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Alan Oscroft owns shares in the Lloyds Banking Group. Motley Fool UK holds no position in any of these stocks. The views on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that by taking into account different insights, we are better investors.