Last week, global market led by the US markets has been dropping constantly, even beyond supporting lines. There seems to be a global bear market coming in. The decadal economic cycle curse is unarguably imminent. We might think that all investors should be running away from the market. However, it is very interesting to notice that there are investment articles suggesting that investors should take advantage in 2019 to invest into either Japan market, emerging markets, or Asian markets at this very moment. You might think these articles are just way of their mind.
We got to understand that, all investors perceive market condition based on individual inner belief system and handle them differently. Out of individual belief system, people build personal investment strategy. And these belief systems can be entirely opposite to one another to their respective extremes.
For example, a pure Chartism can be an extreme belief system opposite to pure Fundamentalist belief system. Pure chartist will execute their investment or trade according to technical chart analysis. They will turn their focus away from any fundamental data. However pure fundamentalist will just do exactly the opposite. Fundamentalist will only rely on economic data to decide their investment movement. To them, chart analysis is just childishly foolish play.
Investment Belief Systems
There’s no absolute right or wrong on either approaches. Both of them can be successful in their own practices and circle of influence. Both also have their own moment of grieve error at times. If market is on a bullish but volatile condition, fundamentalists would be maximizing their profit. Chartist would possibly be losing a large chunk of opportunities.
But in a turn of market condition from a strong bull run to deadly bear, chartist would be the greatest winner, while fundamentalist would turn out to be the greatest loser. Because chartist would be the fastest to identify the turn of market trend. Whereas fundamentalist who makes judgment relying on economic data which would normally leg behind real market condition. When he finally realizes market condition deteriorated enough to ask him quit, market price or index would have been down half way to the pit.
Those who are calling people to keep investment intact based on the released current economic data are fundamentalists. Because there is no indication from any released data saying that there’s a slowdown in the US economy. All those US slowdown proponents are only propositional in nature based on current economic and political events. And their effects are yet to be proven.
Therefore, fundamentalists call them “noises”, something not real, nor reliable, and should be ignored. That’s the reason why we still have people taking up position when markets are having heavy selling. And who knows? Maybe they are right?
Which Side is Yours
The main question comes whether an investor invest into the market pricing or into economic condition? Market players make profit based on prices by buying low and selling high. Market condition is also the fundamental basis to move market prices on either direction. However, market prices move far ahead than economic condition. This phenomenon makes market profiting difficult or complicated or even controversial at times.
The current market rout could be the beginning of the big bear arrival. Most chartists have already been calling this a technical bear market with signal showing or close to bear market, especially after the unexpected big drop last Friday market close. Those who have taken their warning and left market earlier would have a sense of relief by now.
However recent market rout could just be caused by the fear of irresolvable trade war and the US government shut down. What if trade war comes to a happy ending after some good negotiation or US government would not shut down due to timely resolution? Market would rebound considerably high. Fundamentalists will be cheering victory then.
Will current events turn out just noises or real? At the end, whether it will turn out a chartist win or a fundamentalist’s victory, only time can tell.
The good news is, most of us are not pure chartist, nor pure fundamentalist. We are somewhere in between, only leaning close to either side. Which side do we lean toward, only you can tell. But the ultimate investment losses or profits will also vindicate our position. How would you handle recent market rout? The choice is yours based on which side you are leaning to. If you do not know where you stand, just see how you handle current situation. It can also tell you which side you are actually is right now. Unless you want to change your mind.
Let’s keep watch whether market will rebound or goes straight down to the pit or even goes sideway straight next week. It would surely be very interesting. Stay tuned!
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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 conclude individual decision.