The United States economy is slowly putting along. Last week, we learned that the economy added 290,000 jobs last month. As the economic outlook continues to improve, you should look at ways that you can benefit from the rising economy. Whether it’s finding a new job or looking for new investments, there are opportunities to increase wealth and set yourself up for a long, prosperous career. Honestly, many of the best opportunities have already come and gone when everyone thought the world was going to end. Remember when the Dow Jones was at 6,500? Imagine if you had invested more money at that low point! Here are a few ways that you can benefit from a recovering economy.
Float your resume.
Have you been waiting to apply for a new job over the past few years? Do you feel trapped in your current position? Don’t wait until the hiring boom starts. Apply now and give yourself an edge over other candidates for the job. Start floating your resume now that the economy is finally getting healthy again. Staffing companies monitor trends in the job market and they see private sector employment increasing in the second quarter. Companies slashed jobs during the economic recession but are now having to hire because of declining productivity growth. Companies have gotten all that they can out of current employees and will need new employees to meet increasing demand for their goods and services.
You are probably thinking this must be an error because only waiters collect tips. Not true, you can collect TIPS too! TIPS are treasury inflation protected securities sold by the government. They are linked to the inflation index. TIPS are sold at government auctions and will mature in 5, 10 or 20 years. It is practically a lock that inflation will soon be an issue for the United States. The Federal Reserve has kept interest rates at historic lows to encourage lending. Soon, the Federal Reserve will begin tightening and have to raise interest rates. Inflation will also be spurred by a rising deficit due to increasing government spending over the past decade. The combination of these two factors makes inflation a certainty. As inflation increases, these bonds will perform well. You could also pick up some I-bonds. I-bonds have the same net effect and you can always unload them after a year, if necessary.
Buy cyclical stocks.
Cyclical stocks are stocks that are sensitive to the business cycle. It’s great to own cyclical stocks during economic booms because they perform well. During economic depressions, these stocks perform the worst. Sectors like construction, manufacturing, and transportation experience huge sales growth during times of economic expansion. Companies regain pricing power as they ratchet up production to meet customer orders. Examples of cyclical stocks are Caterpillar, US Steel, Ford, Corning, and Union Pacific. The best time to buy cyclicals is during economic bottoms, and you can ride the growth for years to come.
Unload your long term fixed-rate bonds.
Long-term bonds are the worst performers in a rising interest rate environment. Right now, many investors are speculating about whether a bubble is forming in the bond market. Too many investors have run to the safety of long-term bonds. These investors could get burned if inflation rears its ugly head. Let’s say you bought 10 year bonds yielding 4%. If interest rates rise to 7% over the next few years, your 10 year bonds are going to decline in value. No one is going to pay you face value for a 10 year bond paying 4% when the current market rate is higher.
These are just a few of the things that you can do to benefit from future economic growth. Have you taken any steps to benefit from the improving economy? Did you buy anything at an extreme discount whether it be real estate or stocks? Let us know!
(Photo by: Speaker Pelosi)