Dear Ladies and Gentlemen
I was asked by one of my readers to elaborate my view on what can be expected by financial markets until year end? I am happy to do so, but please keep in mind that this is my very personal view and that I can’t foresee the future.
Statistically the best two quarters of the year just started. Additionally, in years of mid-term elections in the U.S. the chances of a yearend rally are fairly good. Moreover, after the recent market slide followed by an impressive rise, the chart technics all of a sudden show some potential for further improvements.
Does this mean everything is fine? No, of course it doesn’t, but for the time being interest rate increases seem to be priced in, trade war fears seem to be priced in, political changes in Germany (CDU/CSU’s and SPD’s massive losses) and in the U.S. (democrats take control of the house) seem to be priced in.
I personally believe we will still see volatility but I would be surprised not to see markets moving higher in the weeks to come. I first expect a short consolidation during the next days and thereafter further increases.
Now, what does this situation teach us? I think that some scare tactics by media and so-called “financial experts” have led to some very unpleasant situations during the last weeks. Panicking investors have sold their equities at the bottom of the market just to see them going up, in the last few days.
Look, Ladies and Gentlemen, 2018 so far is a very special year, we had two 10% crashes in the Standard & Poor’s Index within the past 10 months and we are still not in what is called a bear market, this didn’t happen since the mid 50ties.
But even if we eventually enter a bear market, which we will as bear markets just happen from time to time, this may be seen as normal market behaviour. You know, bear markets happen in average every 3.5 years and last for approximately one year. That is – I admit an unpleasant – part of investing, but so what. If you stick to your investments (as long as they are solid and net free cashflow producing) and if your investments pay dividends, you can always collect the dividends, spend the money or reinvest and wait until your stocks go up again. Just don’t let yourself get too excited.
Please never forget, investing is a long-term exercise and please never forget market corrections are normal, a common thing to happen. The link below shows you a table published by Wikipedia with stock market crashes and bear markets and as you will see, there were many and nevertheless we are still alive and kicking:
https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets
Please do not hesitate to share your thoughts with me on the interview or on whatever seems interesting or bothering to you. Please feel encouraged to do so but please don’t forget (instead of hitting the reply button) to send your messages to:
smk@incrementum.li
Many thanks, indeed!
And now, Ladies and Gentlemen I wish you a great day and weekend.
Kind regards.
Yours truly,
Stefan M. Kremeth
Wealth Management
Incrementum AG
