Market Changes

[Patrick McGowen]

A common mistake that new investors make is to assume the market will continue to behave how it has in the recent past. Having many years of experience and seeing the market change over time, can inform investors making them better prepared for potential market changes. On the other hand it can get people stuck; my grandpa never invested a dime in the stock market his entire life because of what he saw his family go through during the great depression when he was a child. 

Instead of investing for decades, can we learn something by looking at other markets around the world? I recently traveled to Mongolia for my 8-5 job, and took this picture of a local bank. The top three numbers on the sign are the return on CDs for different monthly terms. 18 percent for a 12 month CD!!! Sign me up. Except that Mongolia has seen something like 20 percent inflation. Since I went two years ago, the exchange rate has changed from around 1500 Tugrik (Mongolian dollar) to 2000 Tugrik for one US dollar. The bottom three are for different loans. I think the first is unsecured, the second is business and third is auto. I can’t imagine these are annual rates, let’s assume they are monthly rate ranges depending on your financials. So if the U.S suddenly had 20 percent inflation and banks were offering rates like those below, how would this impact your portfolio? What would your new investment strategy be? If you knew this change was coming in the US what would you do to prepare, and how would you take advantage of this market shift?