The month
of January has seen the best start of the market ever, coming after the worst
December ever. Volatility is the name of the game, and whether you`re a bear or
a bull, i`d suggest to not fall in love with your positions and keep your leash
tight. There`s plenty of opportunity for both the bears and the bulls to make
money over the next 12 months, as long as you trade on a short-term basis.
Despite
this January spike, I don`t see any fundamental changes in the U.S. economy, or
any other western economy for that matter. The only thing that has changed are
the news headlines, with every Trump staffer, including the man himself, making
bald statements about the economy, about the Federal Reserve, about the
U.S.-China relations and about new investments coming into the country.
These headlines do not change the fact that the fundamentals are still rotten, and need a proper deleveraging cycle before things look bright again. Deleveraging hurts, but it`s necessary. The only other alternative to deleveraging is hyperinflation, but I assume—and I hope—that governments decide to not take that route. Because one might think that they can control inflation and move it to a specific sweet spot of let`s say 15%-20%, but before you know it, prices will lead a life of their own and become completely out of control.
These headlines do not change the fact that the fundamentals are still rotten, and need a proper deleveraging cycle before things look bright again. Deleveraging hurts, but it`s necessary. The only other alternative to deleveraging is hyperinflation, but I assume—and I hope—that governments decide to not take that route. Because one might think that they can control inflation and move it to a specific sweet spot of let`s say 15%-20%, but before you know it, prices will lead a life of their own and become completely out of control.
The bear
market has just entered its 4th month, and I see at least a full
year of damage and volatility ahead. This will be a year of trading, not
investing. If you`re into that, you`ll have an amazing time ahead. If you don`t
have the guts to trade, then I suggest taking a step back, go into cash (or
precious metals), and sit out the ride.
I have
shown a few charts that have long term potential to the upside (yes, i`m still
trying to find bottoms, although it is getting extremely difficult). One of
them is the German banking index, and one of them is the Chinese stock market.
I am sure that they will outperform the S&P 500 over the next few years.
Does that mean that they will rise? No, it can also mean that they will decline
less than the S&P, but still decline. So, if you have a long term investment
horizon and a healthy dose of risk appetite, i`d highly suggest to research
these two a bit more.
Thank you
for reading, and don`t forget to stay positive!
Robbert-John Sjollema
The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in this publication is that of the publisher and is subject to change without notice. The information in this publication may become outdated and there is no obligation to update any such information.