Last week looked like a blissful week where US market had a beautiful run up for 4 straight trading days. It broke through the immediate resistance level at 2,730 for S&P 500 index but met with the next resistance at 2,786. This will be an enormous task for S&P 500 to focus on for next week.
Even if it breaks this level, there would be another higher level, the historical height of 2,872 to break before anyone can ascribe the return of the bull for the new market trend. Before breaking this highest point, I will not reckon the bull has returned on the scene yet.
There’re also signs of weakness showing however, that the continuous run up seems to be losing steam. It could be seen at the last 2 trading days before this weekend. The continuous ran up is getting tougher as it gets going.
Signs of Market Bumpiness
On the fundamental side, the strong ran up last week were not propelled by any solid reason. Some said it was because the markets were cheering President Trump that he was making good progress in winning the trade war and headed for the G-7 summit triumphantly. Some said China has finally bowed down to buy more goods from the US after those numerous trade negotiations etc.
I personally feel (IMHO) that those reasons were just merely fade speculation as if someone was walking on thin ice. If anything goes wrong next week, market will drop back to where it was before the run up. In other words, if that happens, global markets lead by the US are still in choppy sessions.
On Asian markets, there were also dancing parties along the way with the US markets run up. But the market fragility was shamefully exposed on Friday when US markets merely had a mixed market overnight.
Almost all Asian markets dropped like hell ended on last Friday market close. It shows the vanity if anyone thought the bull has returned.
As long as trade disputes between those major global economies have not satisfactorily come to terms, global markets will not be able to resume bullishness. Markets will be travelling up and down or sideway for a considerable period of time. In times like these, it will be the most boring investment experience for value investors. But it will be the best opportunity for active traders who have the skill to maximize advantage by slicing off profit between market height’s and low’s.
Funds Recommended for Choppy Markets
As for Asian market, I shall recommend CIMB Principal Greater China Fund with CIMB Principal Bond Fund as its cushion. Greater China fund covers geographical area between China, Hong Kong and Taiwan. It mitigates single country risk if we were to invest solely in Mainland China.
China is facing a tough battle with Trump negotiating trade imbalances. The long term bullish outlook for China market is under pressure. Therefore it is prudent to avoid China single market alone. Besides, CIMB Principal Greater China Fund emerged as the greatest winner among all fund related to China lately. And it is a current recommended fund for Fundsupermart with a one month return of 6.62% as of this writing day.
For Malaysia market, long term outlook is very promising but temporal inhibited by internal probe and investigation and the lack of long term economic strategic revelation. It will go along global market sentiments. If there is any pull back, it is always good to chip in some capital to take advantage of this agitated market play. Fund recommended would be non-other than Eastspring Investment Small Cap Fund.
While all other small cap funds and even other Malaysian funds fell after the change of government, Eastspring Investment Small Cap Fund was the earliest to recover from the dips. This fund was less affected by government link companies which were under heavy scrutiny currently and the near future.
Funds Recommendation for Long Term
While the choppy market is in view, I had accidentally discovered 2 funds that we can consider for long term investment. These are RHB Gold and General Fund and Precious Metal Securities I recommended to my Platinum WhatsApp group member to enter a month ago when gold prices dropped to a comfortable safe level. And these funds have increased a profit of 3.46% and 0.96% respectively. Interestingly, during this month, prices of gold did not increase much, but even dropped slightly compared to the time I did the recommendation.
The reason for the increase possibly comes from mining companies, particularly true for RHB Gold and General Fund. These 2 funds do not invest in gold alone but diversified to other companies that do mining and other related businesses. Under Trump administration, he has revitalized traditional businesses in those mining jobs and refineries, and therefore, value has been added into these industrial recently. If we enter now, we are preparing for equity market to drop anytime, then gold prices will have its bright spot in the market play.
For long term outlook, while equity market will move sideways, but it is most possibly dragged to go down rather than going up. This is particularly true when import tax hike for steel and aluminum is already in effect for the US from June 1st onward from European countries and others. And the rest from China import tax hike will be determined by June 15th. I shall write more in this aspect later on.
Thank you for reading this article and happy investing but invest safely!
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The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions. This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to make up individual investment decision.