Did “me waters” get it wrong?

Founder and Publisher of the Switzer Report
Print This Post A A A

Last Thursday, I suggested, Kath & Kim style, that “me waters” were telling me that we could be in for a better time on the stock market, and on cue, Wall Street dropped 250 points, which of course sent our market down solidly as well. So, did I get it wrong?

In a word: “Na.”

Short vs. long term

It is a nightmare trying to pick the market in the short term and that’s why I invest for the long term. I recommend others do the same unless you are a professional who can play a very short game – a big bash, Twenty20, if you like. Lance Lai from Accountancy Invest, who writes for this report and whose charts I use to suggest that we could be in for some upside with stock prices, is that kind of guy.

He invests short-term and his charts are pointing to a rise in stock prices, but he can look wrong in the very short-term because news flows can temporarily disrupt the trend.

Looking at last week’s US sell off on Thursday, you have to recall that by Friday Wall Street went positive. The Dow was up 67.21 points or 0.53% to 12,640.78 while the S&P 500 was up 9.51 or 0.72% to 1,335.02.

By the way, the big concern on Thursday was the banks after Moody’s downgraded a pile of the world’s biggest, however by Friday, the banks led the charge as stock prices went higher.

Nervous Nellies

News flow can determine daily market moves and 250 points is no longer a scary move in a volatile market. Last week, the US Federal Reserve’s failure to go for or talk up a third stimulus package, combined with the bank downgrades, the weaker US economic data and HSBC’s calculations of the Purchasing Managers’ Index (PMI) data for China’s private manufacturers, didn’t help stock prices. And Spanish bank worries persisted to rattle investors.

This week we get the official PMI for China, as well as housing, manufacturing and economic growth numbers in the USA. Meanwhile, the European Union (EU) has a big summit on Thursday and Friday that could help or hurt the market.

The rest of this year remains tricky for investors. Europe is bound to take its time to come up with a good economic plan and the Yanks face what is called a ‘fiscal cliff’ at the end of the year, which means tax cuts and spending will cease automatically unless Congress can come up with an alternative.

New Presidential term

The one positive about this is the fact a new presidential term would have started and you have to hope that whoever wins will have control over Congress.

The year ahead promises volatility and I would not be surprised to see the market head up as Lai predicts, but then we are bound to see more stock price slumps, which I have been calling, all year, buying opportunities. Buying good companies when everyone wants to sell can be a great long-term strategy, provided you have 15-20 stocks and you have a diversified portfolio.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should consider the appropriateness of the information in regards to their objectives, financial situation and needs and, if necessary, seek advice.

Also in the Switzer Super Report

Also from this edition