How To Address Macro Challenges When Investing | Smart Change: Personal Finances

Inflation, rising interest rates and other factors come into play when investing. In this segment of “The Crypto Show” on Motley Fool live, recorded on February 23, contributors Jon Quast and Travis Hoium answer a member’s question about how they consider macro factors for recommendations and holdings.

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Jon Quast: Personally, I don’t think much about macroeconomic situations. On the one hand, they are beyond anyone’s control and, on the other hand, they are liable to change often. Often, the biggest things to invest in will overcome these macroeconomic challenges. So, yes, there will be challenges. Every day is a challenge when you think about it, that’s life, that’s adult life. You are going to wake up and there is a problem that you are going to have to solve.

I think the best companies and the best projects will be able to solve these problems and keep going. Not that they don’t slow down or take a step back temporarily before taking another two steps forward. But I’m still more focused on the companies, or the projects in everything, and what’s happening on the ground, more than the macroeconomics.

Travis Houm: I will support that. I will say that I think sometimes the macro narrative is actually something to invest against; so go the opposite direction of what financial market headlines are doing. What were we worried about right now? We worry about inflation, we worry about slowing growth.

What has this done to stocks? He has just hammered growth stocks. You can go out and find some really good companies that are still growing. I mean, we saw that, this week. We get earnings reports from companies that are growing 20%, 30%, 40%, and their stocks are falling because they expect only high single digit, low double digit growth on the year next.

We’re getting to a point where if you take away your media narrative and say to yourself, OK, we’ve had a pandemic, there’s been some surge in demand. But what is the long-term growth curve of this growth stock? And you can choose your image grow stock right now. Do I believe in the growth of this business over the long term, and 10 years from now, will I think today’s price is a good price?

I think there are currently a growing number of companies that fit this bill. That’s really what we have to keep in mind, not necessarily whether inflation is going to be next quarter or next year. I mean, if you’re an investor who buys stocks when inflation was really high in the late 70s, early 80s, that would have been a good thing to do. Sometimes going against that media narrative that worries us all because once it hits the media, it’s already factored into the assessment.

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