My Thoughts On The Current Investment Market
Last updated: 21st August 2020
Consider this an introduction as well as a disclaimer - The article below is purely my opinion as a market participant who’s been in the game since 2013 and practicing financial advisory since 2017.
This article will also serve as a platform for me to provide regular updates on my views and market performance for readers and clients. As such, I’ll only present information that is of interest to us. To follow future updates, you can join my telegram channel here.
If you’re looking for an article on technical analysis, read this.
If you’re looking for an article on the market outlook, read this.
Since the start of the year…
The fund’s that we’ve invested in had returned a YTD performance of:
Asia Ex-Japan Mutual Fund: 8.80%
Global Stock Index Fund: 3.72%
What’s next? Here are my 2 cents.
Ever since the market had started its path of recovery, the key question that I’ve had in the back of my mind is whether the current price movements and future potential rally is one that is sustainable.
While indeed, from a technical standpoint, the market is currently trading in the bullish territory, it is important to acknowledge that the technical behaviors currently do not sing the same song with the fundamental’s developments – in this case, earnings - of the underlying constituents that we are invested in.
This disparity between earnings growth and price growth isn’t something new. In fact, it has been around for the last 2-3 years. I’ve briefly spoken about it in my article back in January and since then the market developments had only broadened this disparity.
Prices are currently trading at similar levels if not higher than the previous high despite earnings and earning forecast being revised down due to the impact of COVID-19. The graphs below depict the current picture of the S&P index and the behavior is consistent across most broad regional indexes.
Where will we go from here?
While personally, I’m more pessimistic towards future price movements, frankly my opinion doesn’t’ matter as I’ve no influence over the market developments. What matters is that we, as investors, position our investments in a way whereby, in the long run, we will profit regardless of the short-term movements.
As investors, we’re not here to play god. We’re not here to predict what will happen to the prices the next day, week, or month. We are, however, responsible for our portfolio’s risk-return exposure.
We should manage our investment portfolio in a manner where it will provide us with the right amount of risk-return that we need to achieve our financial plans instead of being overly exposed to unnecessary risk just for the sake of higher returns.
There are no free lunches in the world and if you play stupid games you win stupid prizes. As investors, we should try to make sense of what’s actually going on in the world and from there compare it with the actual price developments to see if it is in alignment.
If it isn’t, then that’s where you should be slightly more cautious about how we approach our investment operations. The key here is to strike a balance between staying invested while at the same not being overly exposed to a market with unsustainable developments instead of investing or divesting just for the sake of it.
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Should you need a second opinion or help towards your investment and financial planning, you can get in touch with me here.
This article is meant to be the opinion of the author and is for information purposes only.
This article should not be seen as financial advice
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