Interesting to note that markets have been stereotyped for this while. Anyone who has been paying attention would have noticed a certain pattern. First, it is the US dollar value has been steadily rising no matter what happened. It just moves its way up without any hindrance ahead seemingly. Its appreciating value has been pushed by the interest rate hike propelled by the Fed. If it’s going to have subsequent 2 more rate hikes this year and 3 times next year, the dollar will certainly have further room to move up. Unless something unusual to cause Fed to slow down its initial intention, or even stops its continuous plan.
If that happens, fear of imminent recession will grip investors. Equity market will drop like hell. However, it looks likely there is nothing in the near future could trigger this eventuality, not even the trade war or Turkey crisis. Even when the trade war really hits, inflation will kick in, Fed will have to keep on raising its interest rate. The only stampede on its break will be the sign of economic recession.
Prices of spot gold have been moving in opposite direction to the dollar ever since April this year. As such, gold prices will have some more room to drop. Therefore, unless you are on a dollar cost averaging strategy, or having enough capital to top down for another six months from now, it will be prudent to look for the escape window exiting gold related funds temporarily.
Markets have been developing in such a way that it does not suit our expectation. US markets have been more resilient than what has been expected so far. It is expected to move up further even though its strength is weaken according to its volume and average travelling range (ATR).
When investors are expecting trade war to escalate further, particularly between US and China, many have been moving their asset from equity to bond recently. End of August and early September could possibly the critical period to observe how severe Trump is going to ignite his trade tariff against China goods. This will affect inflation rate, production cost and others for subsequent quarterly corporate earnings report.
For conservative investors, it is a good practice to take a back seat and watch how market will spin around for the second half of the year. For aggressive ones, bottom fishing will be still possible whenever market drops or crashes. But winning any profit will take extreme skill and immeasurable risk.
In market such a high volatility and unpredictability like this, anyone with mutual fund as investing tool, if not losing, having at least 5% or more yearly profit will be considered quite a discern investor. Choosing good bond funds will possibly lead you there as well.
Thank you for reading 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.