Economic Market Watch Update: 1/5/2017


Trump EffectSince the US presidential election, the US-led global stock market took off. (As I wrote in the previous article that there is a good stock market investment opening from hereon, but it is only for a short-term. Currently we may have been halfway through.) Those who have participated in investment during this period, if appropriate, should have seen a handsome harvest.
Until now, perhaps everyone should pay attention; market sentiments have changed. Most of Trump’s campaign promises which were pro-businesses in the US, such as large-scale construction plans, compelling large businesses or corporates returning to the United States,  restoring China goodies back to the United States and so on, have all seemingly failed. Now there left only last chance of hope … US big corporate tax cuts. Therefore, the enthusiastic expectation of US investors on the new President has gradually been losing. Evidence is shown on recent sideway US stock market trend.
SP 500 Chart English.jpgThen, we need to watch the next important clue in the direction of the US stock market; the last straw on the back of Trump’s camel is the corporate tax plan. If it cannot go through the Senate / Congress again, the market will fall sharply. (We also do not know whether President Trump then has anymore “tricks” to do! ) Trump will be the largest laughing stock among all the US past presidents. Even he himself admitted recently that he didn’t expect the job of the President of the United States can be so complicated and difficult!

The impact of French elections

First round of France election did not show any surprising outcome. And thereby the US and European stock markets felt relieved, and both immediately shot up immensely. The next round of French election (7/5), most observers believe that wining chances of the extreme rightist Le Pen (European markets fear the most of her winning) is not high. There may not be any surprising outcome too. Unless it is another black swan like Trump or Brexit appears again, but the current stock market is not expecting this outcome yet. Even if it appears, the impact for long-term investors will have very little effect. The impact will be felt mostly for short-term speculators.
We have to remember one long term principle of a stock market…..  Stock market tumbles out of “uncertain”, causing panic sell-off. Once the results have been determined – whether the war has already been confirmed started, the election results are out of expectation, the stock market usually returns to normal uptrend as in the cases of both US elections and Brexit event. Most observers have been predicting that once Trump was elected, the stock market would collapse. By now, we all know that the results are exactly the opposite of these predictions.

Investment potential areas

At present, the Asia-Pacific region, and emerging markets are still the largest potential areas for economic growth. On individual countries, China, India, and even Southeast Asia nations, like Indonesia, or Vietnam, etc., are areas where investors should pay attention. The growth potential of advanced countries such as German, Japan, Australia, the United States and others still exist. Only in comparison, the upside potential is relatively limited.

If US investors are disappointed with the performance of the new US president, the funds that have flown back to US after US election are likely to return to these emerging markets again. So those “early birds” catch the worms!

Current Investment Expectations

When the market dipped sharply, the most fearful issue was the arrival of the Great Depression. Your invested capital, newly top-ups funds, or bottom fishing funds, etc., will become a nightmare. That’s why whenever some negative events came out, such as the continuous sharply decline oil prices, the EU market crisis, which were seen as potential causes for global economic crisis, heavy market selloff happened and hence caused market tumble.

My personal view is that the conditions of the global depression of the century has not yet come. There are three reasons; first, the US economic market, through the recent quarterly report from large corporations and employment data etc, we can see that US economy is still on its healthy growth. Secondly, the interest rate hike has not yet reached the level that can cause financial liquidity crisis. Currently it is only at 1.0%. If it goes up more than 1.5 or 1.75%, we need to be very careful! Thirdly, the mentality of most investors is still very cautious. It has not yet reached the state of euphoria. Those gloom and doom articles are still attractive to marketers. If once the market is hot, investors are mad throwing money into stock markets, these gloom and doom pessimistic articles will mostly be ignored by most, then the market crash will come at any time.

With the above background, what kind of investment spirit should we have? We should prepare or anticipate market dips. If it happens, we will have good opportunities to enter or top up. So we should anticipate stock market to dip here and there or consolidate substantially. We should prepare some bullets (money) in advance, at the right time we can pull our triggers. So, if there is no dip, we should be disappointed instead.

At the moment, we can still learn investment skills, to understand the idea of consistent income, learning maturity in investment etc.

 

Disclaimer: The author expresses his view based on his own learning experiences and share for reference only. Readers are advised to use individual assessment to do investment.

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