How to navigate the stock market

February 17th, 2016



When trying to determine how the overall health of the stock market, it is important to look at the right indicators. Certain stocks are very influential on the market, and others are not so important.


Many people fear a stock market crash, but don’t follow the market to have any way of determining if a crash is soon coming.


As someone once told me, to know one stock is to know all stocks better. Therefore, I would advise someone to begin watching the pattern of a single a stock if they have had no prior experience with the stock market.


There are several stocks that can be used as indicators for the strength of the market.


In other words, when these stocks are doing well, the entire market is usually doing well also. Some of these include the prices of gold, oil, 10-year treasury notes and bonds.


As many know, the price of oil has been a topic of hot discussion for the last several months. In July of 2015, the price of one barrel of crude oil was above $100, now it is under $30. This is a significant drop in price for a stock to take, and has some economists very worried.


If a person looked solely at the price of oil to determine how the entire economy was doing, their viewpoint would be seriously jaded.


If you were to take a look at the price of an ounce of gold, you would see that the price of gold is rising. Therefore, people who are invested in gold stock are making money.


Over the course of the last year the price of gold had significantly dropped until the turn of the new year when gold prices spiked up higher than they ever were in 2015. Gold is currently priced around $1,200 per troy ounce.


Another stock that is indicative of the patterns of the market is 10-year Treasury Notes. These are a form of U.S. government bonds. The U.S. government sells these debt obligations that reach its maturity in 10 years. These kinds of notes are often popular because they are associated with very low risk, and offer a predetermined return.


The sale of 10-year Treasury Notes has been on the rise within the last five years, and are currently the highest that they’ve been in the last year.


Bonds are another important portion of the stock market. A bond is a contract issued by a company stating that they have borrowed money from another source, and intend to pay that same amount back plus interest by a predetermined date.


In other words, a bond is an IOU.


Any company can issue bonds, but when watching over-all market trends, one would most likely pay attention to U.S. government bonds.


Generally speaking, most U.S. bonds are selling higher than they were one year ago.


These four stocks can be interpreted in different ways, but it can be certain that three out of four are doing better than they were a year ago.


While many people are scared that our economy is headed south in 2016, it is important not to panic too quickly. Many market indicators suggest that the economy can handle the new year’s rocky start, and I encourage you to see for yourself!