DON’T look at the markets, market commentaries or your portfolio’s value. The only effect will be to tempt one to do something- and that “something” will almost certainly be the wrong thing.
The more bearish investors become, the more they sell short both markets and individual shares. So far, attempts to “buy the dip” have failed, but once a critical level of short positions are established, (or the news is not as apocalyptic as is currently supposed), there will be few sellers left, leading to a scramble to buy back, thus causing a sharp price rise and a re-establishment of the demand/supply balance. Market complacency is being challenged in the only way it can be- by maximising trade volumes, which in this instance means “forcing” investors to sell, via sharp declines in price.
(Re)-examine your risk tolerances. It is easy to get over-confident (and thus over-exposed) when prices seemingly rise effortlessly. This should be an opportunity to check that your market risks are still aligned with your ability and willingness to take those risks. That should be the only reason to act (and even then, selling now may not be the optimum response).
Focus on the long term. Unless you believe that capitalism will be brought down by a virus, this is just another bout of selling that will lead to buying again, as investors recognise that they have (once again!) over-reacted. Since January 21st, when concerns over the virus first got started, the Shanghai Composite Index has out-performed both the S&P 500 and the German Dax Index- China is supposed to be the epicentre of this crisis!
Things have a way of working out on their own - Bernie Sanders IS a genuine socialist and WOULD be a disaster for both markets and the economy across the world, but betting money appears to be far more sanguine. It seems that the higher the odds of Bernie’s nomination get, the more likely it is that Trump will win…
AND a final thought. Arguably the world’s most successful investor (certainly most well-known), Warren Buffet, was reported to have been down $340 million in March 2009, following the financial crisis but lost nothing, because he didn’t sell!
As always, if you have any questions concerning this e-mail or any other finance related matter, please do feel to contact me at any time.
With kind regards,
Yours sincerely
Graham Ponting CFP Chartered MCSI
Managing Partner
