2018 is a financial nightmare year.
Firstly I would like to declare that the financial market of 2018 is a disastrous year. If you feel your portfolio isn’t looking great, trust me everyone (personal investor, Fund managers, Global Banks and Warren Buffet) is feeling exactly the same. Money invested for the thriving global economy have been wipe out by monetary rules and politicians.
Rising interest rates, increase employment rate and steady inflation is generally a good sign of economy growth. However, politics and social media have taken all the fundamentals indicators and crush in right through the floor.
Dot-Com Bubble crisis in 2000 was cause by failed highly inflated internet companies impacting billions of losses. Housing and Banking global financial crisis of 2007-09 was cause by property bubble crash resulting in large credit losses. I am confident that we are not in a Global Financial Crisis as stated back in my post many months ago. There are no clear indicators of large net losses in valuation of company business in the large and mega capital companies.
Apple, Microsoft, Baba, Shell, BMW, Amazon, Facebook……… and many more companies are reporting growing profits but just not achieving the forecast profits which the larger institution investors were expecting.
Where are we now?
Most of us are feeling deflated, panic, desperations and or numb. Are we near the bottom yet? Will it turn around next week or next month? HONESTLY NOBODY KNOWS!
FTSE 100 (United Kingdom)
The UK financial market today is equivalent to the March 2018 correction support at 7000. This is also the same pre-2017 Santa rally. Most analyst says its a good time to get into UK equity investment from the low currency valuation.
The main reason for the halting economy growth is the obvious annoying and frustrating Brexit situation which rules the media in UK. There are so much uncertainty on what will happen in the next couple of months. Things are only going to get worse if we lose our current Prime Minister or No-Deal Brexit.
UK financial economy are heavily weighted to energy, commodities, consumer staples and financials. Any bounce on the UK economy (next few weeks) would be most likely due to energy and commodities bounce. Which is not a reliable support! The only saving grace support is from consumer staples where companies like Unilever, RB, British Tobacco and Diego profiting from their global currency exchange rate.
I would avoid any UK stocks, shares, index and mutual funds investing for the next few months until things stabilise. Yes, UK economy is greatly under-value, but the real question is when.
DAX(Germany) and CAC40 (France)
Reflecting on the German and French counterpart on the EU front, the situation is exactly the same with the UK economy. Everyone in EU are losers in this BREXIT too. Slowing economy and introduction of new EU laws to stop Chinese and US streaming their cash out with technology and online business is not going to stop the decline.
I would stay away from the rest of the EU investing for now.
US clearly had a delayed reaction from the financial correction this year. The rally from March 2018 till September 2018 was clearly very artificial. Despite Apple and Amazon being the first two companies winning the 1 Trillion Dollar race, they are not close to what they were worth back in Q3 2017.
US are still a long way away from the 2500 support line (8%). A potential drop into the 2400 zone line (12%).
Apple are nearing $180 and Amazon at $1500. Cloud Kings losing up to 15%. Gaming Companies losing between 20-40% from its peak. The list goes on and still not an end in sight. Looks like we may be looking at the 2019 Q1 Earnings to help anchor back the support line.
There is three major key issues US needs to resolve before any improvements can be seen. First is the Chinese and US trade deals between the two great nations. Second is the federal reserve chair Mr Powell relaxing the policies (rate rise) allowing growth from the fundamental datas. Third and final….are tech sectors really slowing down? Everyone are basing facts on slowing iPhone sales determining the future global growth. So what are people spending their money on these days?
Let’s hold and wait till after Christmas 2018.
General rule of thumb, financial crisis is 40% loss from its peak. Both Hong Kong and Shanghai markets have lost more the 40% from their peak. Chinese are accused of devaluing their currency to support the decline in equity share values. Honestly how low can these Chinese market go?
Out of all the marker, I think the Chinese market and companies are nearing closer to the visible bottom barrel than any other global market.
Slow stage-buying of the Chinese emerging market would be the better probably financial investment out of the lot. However buying Chinese emerging market can be slightly tricky. Firstly avoid investing in any individual companies other than index/funds containing heavier weight on Ping An, Baba and Tencent. Secondly you do not want your portfolio to contain more than 30% of emerging market shares which increases the likelihood of volatility.
Nikkie 225 (Japan)
Despite losing 20% from their early 2018 peak, Japanese economy has never look healthier compared to last decade. They are looking to return to moderate economic growth. Expected first rate rise in Q3 2019 might boost the economy staple shopping and tourism. Politically, Japan seem to be the only nation thats cooperating constructively with everyone including US and China.
Japanese economy would be a safer investment area compared to European market just now. Investing in Japan can be very uneasy and also expensive. Most index and funds contains heavy car industry and manufacturing industrials. Which I personally do not see any reliable growth. Japan economy is boosted by its consumer staples business globally.
There is only one fund which I recommend – Lindsell Train Japanese Equity.
Overall view, I would recommend to hold off any investing for the month of November and perhaps even December 2018. Despite Chinese Emerging market nearing the bottom barrel and Japanese economy looking moderately healthy, I would hold off until the global outlooks fog gloom clears.
No reason NOT to start saving up your investment pot.
No reason NOT to sell that unwanted items in the garage to raise money.
No reason NOT to prepare your shortlist and agenda of which stocks to monitor.
Warren Buffet did say that its best to BUY WHEN EVERYONE ELSE IS FEARFUL.
HOWEVER, we are not Mr Buffet who have a $100b of cash stored for days like these. We are all hard working individual with an actual very finite amount of cash!
This is my philosophy for success if you cannot find the bottom barrel, just buy on the upward trend at a later stage.