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Profit from a Global Stock Selloff
Stock markets across the world plunge on the news of an increasingly severe debt dilemma in the Euro Zone. In the meantime smart investors can look for ways to profit from a global stock selloff. United States and European stocks fell on news of increased borrowing costs in Spain. Investors fear that one more nation in the Euro Zone may need a costly bailout. The concern is one of contagion. As the European economy suffers so do exports from China, trade with North America, and Euro-derived funds for investment throughout much of Asia. Using the so called blood in the streets analogy it may well be time to profit from a global stock selloff while depression rules the markets. This sort of strategy would be similar to a decision to invest in European junk bonds or Chinese real estate after their market collapses. To profit from a global stock selloff the investor needs to have a good sense of when the market has hit bottom and a good sense of which stocks will then have big upside potential.
When and Where Will the Market Bottom Out?
To profit from a global stock selloff an investor will need to go back to the basics. Fundamental analysis will help him decide just how low a give stock will fall. Technical analysis will help him spot a turnaround in market sentiment in order to most accurately enter the market near the bottom. The decision will not begin with picking a given stock but rather with picking a market. Has Japan already bottomed out due to the effects of the tsunami? When will China hit its low point in exports? Will overlooked stocks in the Euro Zone prosper in the long run with a weaker Euro? To profit from a global stock selloff one still needs to look at individual markets and then at individual stocks in search of the best opportunities.
A Close or Distant Time Horizon
When will an investment in a weakened stock turn to profits? To profit from a global stock selloff one needs to pick the most promising stock at the bottom of the market. The most promising stock may be one that is likely to rebound in weeks or months based upon changes in market sentiment. Or the best stock to profit from a global stock selloff may be a stock with very long term growth potential. Long term growth potential may well be the case with Europe. The likely solution to the debt dilemma will be for the Euro Zone to spend its way out. This will likely cause a substantial devaluation of the Euro. That same devaluation will make European products more competitive than they have been for years if not decades. A weakened Euro may well lead to stronger Euro Zone companies, more competitive products, surging Euro Zone stocks. One may choose to invest in Japan, invest in Russia, buy depressed Chinese stocks, or buy stocks in the USA.