Welcome to the 92st Issue of Weekly e-newsletter by www.HousingLoanSG.com This week I like to share with you "Has a New Bull Market Begun?" Last 2 weeks I was busy writing the First Bilingual Book on Personal Finance "Mastering Your Personal Finance". which will be published in the next month, thus, I did not send out any newsletter. My apologies.
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Cheers!
Dennis Ng, http://www.HousingLoanSG.com - help you get BEST Deal in Housing Loans in Singapore & Australia!
Has a New Bull Market Begun?
From the low on 9 Mar 2009, Global stock markets have been rising for the last 9 weeks consecutively.
One month ago, some analysts were very bearish on the market, one month later, they are making a 180 degree change in their views and become extremely bullish, such “hingsight analysis” is really laughable.
In Jan 2009, I wrote in an article that Global Stock Markets are likely to bottom in year 2009. Thus, you would know that I don’t make hindsight analysis.
Is it certain that a new Bull market has begun? Some might say:”definitely!”
However, my personal opinion is that there are 3 possible scenarios.
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Jan 2008
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Jan 2009
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8 May 2009
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Compared to Jan 2009
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Dow
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13,191.50
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9,034.69
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8,575
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35%
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Shanghai index
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5,522.78
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1,820.81
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2,626
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52%
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HK Hang Seng index
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27,637.60
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15,042.81
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17,390
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37%
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Nikkei Index
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15,156.70
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8,859.56
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9,433
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38%
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India market
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21,206.80
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9,958.22
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11,876
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44%%
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Singapore STI index
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3,437.79
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1,829.71
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2,238
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35%
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If we compare the markets with Jan 2009 with the closing prices on 8 May 2009, all stock markets are at higher levels, except for exception of U.S. market.
China ranks as the best performing market in year 2009, rising 44%, but compared to Jan 2008’s prices, China stock market is still down by 52%.
Scenario 1: U or V Shape recovery
From historical records, stock markets bottomed when economy is at its worst. If global economies were at its worst in 1st quarter 2009, then it is highly likely that Mar 2009 was the bottom for Global stock markets.
As this crisis started from the Credit markets, an improvement in LIBOR (3 month rate) London Inter-bank offered rate, seen as the indicator for the health of Global Credit markets in the last few months also bodes well. LIBOR has dropped from over 4% a few months ago to now below 1%. The “thawing” of credit markets will be followed by thawing of economies and also thawing of stock markets.
2nd Scenario: Double Dip, or a “W” shape recovery
U.S. unemployment rate has increased to 8.9% currently and might exceed 10% in the months ahead. We need to remember that the U.S. economy contributes 25% of the World’s Total Ecconomy, while U.S. consumers (consumption) constitutes 70% of U.S. economy. Thus, increase in unemployment might mean a delay in recovery of consumption and thus, a delay in recovery of global economies.
Thus, after the recent stock market rally, the markets might fall again when it becomes clear that global economic outlook remains weak as long as U.S. continue to retrench more people.
3rd Possible Scenario: Stagflation or "L" shape recovery
In the last year or so, countries around the globe are busy “pumping” money into their economies. However, if U.S. unemployment rate remains high and U.S. economy is slow to recover, what might happen is we might have low/no economic growth, coupled with spike in prices and inflation. This is known as stagflation, and in stagflation food prices, commodity prices, and prices of real assets, including real estate (property), commodities such as rice, sugar, copper, wine and precious metals such as Gold and Silver will spike up. While high prices result in high costs and slow growth result in lower sales, thus corporate profits are affected and stock prices likely to remain weak.
The important question is are you positioned for the possibility of Scenario 2 or Scenario 3 happening? If scenario 2 or 3 happens, would it mean you would lose a lot of money?
One way to mitigate risk is to “diversify your money into different assets. Personally, I have 8% invested into Gold and Silver, 5% in French Fine Wine, and also invested into other investments not directly affected by the stock markets, such as 12% into UK Traded Endowment and 11% into Land investments.
Compared to Jan 2008’s prices, global stock prices are about 35% to 52% lower. However, becos I diversified my money, my overall investment portfolio did not suffer loss and is even making gains over the last year or so.
Proper Financial Planning is to be financially prepared for the possibility of different scenarios happening. Have you planned in a way so that no matter what happens, you will be financially ok?
Note: above is just my personal opinion. This e-newsletter is not giving you advice.
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Dennis Ng on behalf of
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