As measured by the S&P 500, the stock market is down nearly 21% from its recent highs. With the combination of a soft economy, high inflation,, and rising interest rates, there are still significant risks that stocks could fall even further.

So if you're wondering whether it's safe to invest in the stock market right now, the answer is a resounding "no." But then, it has never been "safe" to invest in the stock market. A better question is whether the risk-vs.-potential reward balance has started to tilt back in favor of investing in stocks. And on that front, the answer is a much more wishy-washy "it depends."

Investor on the phone looking at a downward pointing stock chart.

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Your money is always at risk

If you step back and take a broader view, it's clear that your money is always at risk, whether it's invested in stocks or not. For instance, even high-interest savings accounts are currently only paying around 1.6% in interest,  which is well below the recently published 8.6% inflation rate. As a result, even money "safely" tucked away in a bank is losing purchasing power.

As if that weren't enough, even investments specifically designed to fight inflation have strings attached that make them less than ideal tools on that front. I-Bonds, for instance, require you to hold on to them for at least a year, and if you hold them for less than five years, you sacrifice three months of interest. So while the headline rate may look as if an investment can keep up with inflation, it takes five years for you to really do so.

In that five-year time frame, the stock market might have a decent chance of beating inflation, not just keeping up. In addition, long-term capital gains on stocks are taxed at a preferred federal tax rate, versus the interest income received on I-Bonds. So even if you do hold on to your I-Bonds long enough to truly get their promised returns, what you'd end up keeping after tax still doesn't really keep up with inflation.

Potential values are starting to appear

On the flip side, the general carnage in the stock market is starting to make some companies bubble to the top of value-focused screens. Homebuilder Beazer Homes (BZH 2.02%), for instance, trades at less than four times its forward earnings estimates and around half its book value. With rising interest rates and a slow economy, the fear is palpable when it comes to companies involved in building houses where a typical buying contract requires a 30-year mortgage to pay it off.

Still, when you recognize that Beazer Homes has a decent balance sheet, with only around a 1.3 debt-to-equity ratio and a current ratio above 8, it seems reasonably well positioned to withstand a challenge. Despite interest rising rates and new listings, housing availability is still below what it was pre-COVID, which could provide some buffer against a full-on crash.

Is buying shares in Beazer Homes risk-free? No, but in a world where inflation is still a bigger threat than deflation and there isn't a massive glut of available houses, it's certainly worth considering as a potential investment. Do be prepared to be patient, as tough economic news could mean further short-term pain, but over the course of time, the fundamentals should prevail.

Recognize the trade-offs and seek out values

As Warren Buffett once said, "Be fearful when others are greedy and greedy when others are fearful." The market's drop has spooked investors and started to offer up reasonable to cheap prices on some companies. If homebuilders like Beazer Homes still seem too risky for you because of the industry they play in and the current economy, that's perfectly fine. The key isn't to go and buy that stock, but rather to look for companies that the market has now put on sale.

With that mindset, it may not be safe to invest in the stock market, but it's certainly starting to look interesting again. Now is a great time to start poking around and looking for value, and if you find it, feel free to start nibbling. There are never any guarantees when it comes to stock investing, but bargain hunting is certainly a worthwhile exercise to start looking into now.