How To Invest In A Stock Market Recovery

There’s no doubt about it, even the nay-sayers and doom-mongers are starting to admit that there are early signs of a recovery in the economic performance of the UK. Of course, economic performance lags behind the feelings of the market, which is much more about confidence and optimism than deep analysis, especially in the consumer markets that drive the cash flow.

There’s no doubt about it, even the nay-sayers and doom-mongers are starting to admit that there are early signs of a recovery in the economic performance of the UK. Of course, economic performance lags behind the feelings of the market, which is much more about confidence and optimism than deep analysis, especially in the consumer markets that drive the cash flow.

So, signs of recovery, good news all round and time to start investing? Not a bit of it; the recovery phase is usually considered the worst time to invest, prices are high and sufficient company profit is too low to allow decent dividends to attract the big funds. 

Actually, the recovery phase is one of the more dangerous parts of the business cycle. A lot of companies have been living off fat for the last five years or so; many put off the difficult decisions that have to be made in a recession for too long meaning that now, when they need to invest in promotion, new product development etc. they don’t have the reserves. A good hard look at the strength of the balance sheet is essential when investing during the recovery. 

On the other hand, the recovery is a very good time for spread betting, simply due to the amount of activity in the market and the fact that those trades are going to be driven more by optimism and confidence than hard numbers. For the spread better, reading the market perception rather than the actual underlying commercial performance, is more likely to give them their strategy. Everyone wants to be a part of the recovery and get their money working for them again, but many will still be cautious and go for the safer investments, giving the spread better a good idea of where to bet long and, by knowing the balance sheets in their sector, where to go short.

A spread betting provider will provide good analysis of what is happening in the market, allowing those looking for good bets to keep scouring the world news for events and influences that they can turn into intelligence on likely market response. After all, the UK recovery is mostly about the demand end; with so much manufactured overseas now, profitability is as much about sourcing as it is about having a customer. Take China, for example, their own people are now consuming more and more of their production capacity; where will UK companies go next for cheap supplies?