How about this volatility
John Paulson, American investor, hedge fund manager and philanthropist stated:
“The stock market goes up or down, and you can't adjust your portfolio based on the whims of the market, so you have to have a strategy in a position and stay true to that strategy and not pay attention to noise that could surround any particular investment.”
In the light of market reactions to President Trump’s tweets, John Paulson’s words take on greater significance.
We are currently in a period where market volatility is higher, and the global markets are reacting to every piece of news as if it were truth. A summary of recent events surrounding the China-USA trade scuffle can be found here.
“Here’s everything that happened over the weekend with the US-China trade war”
In these times, we need to remember we are investing, and not trading. That is, strategically build a portfolio that has the appropriate mix of growth (shares, property) and defensive assets (fixed income and cash), select companies that fundamentally have a strong business case in areas of strong sector growth and are prepared to ride out shorter term instability for long term benefit.
Of course, we need to be prepared to adjust portfolios, at times take a more defensive position, so we can take advantage of opportunities when they arise, but ultimately, we need to be clear about our longer-term strategy and adhere to it.
With the current uncertainty created by the trade war, and other events, it is unclear what will happen to market prices in the short term. However, our base line view is that President Trump will be keeping an eye on the 2020 presidential elections. He was elected on a platform that he would grow the economy and that he is a ‘deal maker’. He therefore will not want to go into this election without markets doing well.
On that basis, we are viewing the markets with caution, but are not overly concerned now. The US Fed Reserve has ample fire power having increased interest rates over the past 5 years and can favourably deal with changes in the underlying economy. Unfortunately, here in Australia, we do not have such a luxury – we are increasingly tied to the outcomes of China’s continued development. Thankfully, China’s governing party unleashed a significant infrastructure spending package at the start of this year, which will begin in earnest around October this year.
