With all the drama all around the world, I firmly believe that 2019 will be still a great year with plenty of opportunities ahead and some really interesting developments. For FIRE aspirants such as myself, this could be a crucial year to move a big step forward towards the aim of financial independence. But before we get to that, let me point out a few interesting developments:
- Plenty of undervalued stocks – yes, 2018 was not great for investors, but many high-quality stocks suffered dramatic losses that were not really justified or simply exaggerated. In Europe, we have the car industry with such amazing brands like Daimler and BMW which trade on lowest valuations and have the potential for great turn-around stories. Look at the chemistry sector, with BASF being down to levels which we didn’t see for 5 years. Of course, you can be more careful and go for a diversified DAX ETF product to invest in all of these companies, but in my humble opinion, now is the time for cherry picking. Many of the most recognized brands are now at seriously low valuations and up for a grab.
- Dividend season is coming soon – while US investors enjoy quarterly or even monthly dividend payments, most European companies pay out dividends only once or twice a year. For European investors, the dividend season is usually between April – July which starts only 3 months from now, and chances are that 2019 will be another record year in dividend payouts. Also, with the currently low valuations, dividend yields look great!
- A recovery might come sooner and quicker than we expect – Because, despite all the uncertainties and drama, companies still make money. There is currently no serious threat of a financial crisis, political risks are mostly priced in the market and in general, I would say that most investors are by now pretty used to calculate risks and price them into their investments. This would indicate that as soon as things start looking more stable, everybody will jump back on the train and market valuations will move up swiftly. You saw a glimpse of that just yesterday when there was a rumor about a potential new trade deal between China and the US.
So knowing all these points, it might be not a bad time to put some cash back into stocks. Personally, I have put most of my cash reserves in stocks during December, when things were dropping down. This way I was able to lower my average costs per share for some of my stocks, which were hit the strongest by the downturn, and I hope this will pay off over the next few months ahead.
If you did the same, kudos! I believe it was. a great move. If not, watch out for undervalued stocks in the market. High dividend yields, low price/earnings ratios with solid brand names, large cash-flows and proven business models are on sales now. For the US market, take a look at AT&T, Oracle, Coca Cola, Apple.
Every stock downturn is a time of chances and opportunities. While inexperienced investors are biting nails, FIRE aspirants are scrambling all the cash they can find to put it into the market. Because, as we know, every downturn is an opportunity. Every crash is followed by a recovery. And every high yield that we can secure now, will ultimately help us to reach our goal of early retirement faster.
Disclosure: I am long invested in Daimler, AT&T, and Apple.