I wrote two weeks ago that I was concerned about a correction starting on Wall St. Now I am convinced a Wall St correction has started and better buying opportunities in high quality equities will present themselves over the next two months.
US 10-yr bond yields have fallen to 2.23%, the Japanese Yen to 109, Iron ore has crashed, Gold is up $50oz. Last night the S&P500 broke down through its 50 day moving average for the first time since Trump was elected, led down by financials. I warned that the “Trump trade” was in trouble and it clearly is.
It’s clear bonds, commodities and currencies have gone into “risk off” mode. Even the VIX has risen from its recent slumber. To me, it’s now certain that equities will join the risk off mode, led by US equities in what is a classic and long-overdue pullback.
I would refer you to my note of two weeks ago because the thesis is playing out as I thought it would.
As you know I am broadly cautious on all things USA, but particularly the US Dollar and US equities. This year I am far more bullish on China, feeling Chinese economic growth is running ahead of bearish expectations.
As we had many requests from subscribers who attended the recent Switzer strategy days, I thought I’d attach my slideshow from those presentations.
These slides are my core bullish China thesis and an attempt to explain why I am so bullish on the Chinese consumer this year. I hope you find them interesting.
Over the next few months, we should get a chance to put some cash to work in great stocks at great prices. My advice to you is to wait for that moment and don’t simply put cash into equities at high prices because some financial planner tells you there is a tax advantage before June 30th.
Remember, the ASX200 peaked in 2007 on exactly the same changes in super which saw people rush to put assets in super. The problem was the prices they paid were too high. Just be patient, doing things for tax reasons is almost always the wrong reason. You should buy a stock when its value and that value will present itself in the next few months.
In the meantime, educate yourself on China and write a list of stocks you would like to buy as markets correct.
Important: 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. Consider the appropriateness of the information in regards to your circumstances.
