I have no idea how long the next bull or bear market will last. But I’m confident that future bull runs will last far longer than bear markets. This is really what it’s all about — learning from the past to make better decisions in the present.
It was a truly nightmare week on the markets. If you trust the US Fed to be able to smoothly unwind its emergency low-interest rate policy without crashing a market bloated on low rate-driven investment, then you probably aren’t worried. If you don’t have that much faith in the Fed, you might see them as having painted themselves into a corner.
February has seen a $60 billion fall in the Australian stock market. Every sector has been affected, and it’s hard to tell what's in store for the ASX.
You’ll read a lot of sweeping statements now as markets correct, but markets are just fully extended right now. Stock market corrections are completely normal. So just be wary when reading some analyst who suggests things are on the verge of collapse. Concerns over inflation and rising interest rates may have sent stocks tumbling, but underneath it all, the US economy remains strong.
Yesterday’s sharp fall below support at 6,000 points (and back to where we were three or 10 years ago) suggests a certain malaise in our economy. Australia has deep seated problems that go well beyond a one-day stock market panic. Let me explain.
The Dow Jones dropped 1,175 points on Monday — the largest single-day point drop in history —erasing all profits made so far this year. The 4.6% decline is the biggest percentage loss the Dow has suffered since 2011, when we saw a drop of 1,089 points on 24 August.
We could be at the start of a shift in investor sentiment. It’s a shift that now acknowledges P/Es are too high, given we’re in a rising nominal rate environment. So while rising rates won’t derail the economy, they will derail investor sentiment. Which means P/E contraction will be the driving force behind this correction. So how should you invest accordingly?
China has a fake food problem. The country is chock full of fake soy sauce, rice and eggs. Not hard to see why Chinese parents love Aussie formula so much. But how can the country combat the flurry of fake foods? Blockchain technology might be the solution…
In his big State of the Union address yesterday he laid down the plan - He’s going to increase the debt. A massive US$1.5 trillion infrastructure plan. Throwing good money after bad. Or should I say printing more money to pay off printed money. What to make of it all?
The risk is that that all this printing of money leads to inflation. I think that’s what the bond market is reacting to now. However, over the past two years there has been no volatility at all. The highly leveraged global economy has been good for global stocks.