Jumping market jittersPosted on: 06 April 2018 by Peter McGahan
Peter McGahan says there are obvious points in your financial life to step into or exit financial markets - but this should never be done in response to temporary volatility.
Immediate gratification, immediate data and nonsense news, immediate response. The new world?
The oxymoron of ‘smart’ phones is a tad lost on me. If they were smart, or as smart as a teacher, they would tell us to turn them off.
I hadn’t thought at all about how people use their phones in relation to investments until I recently saw them used to check up on investment values on an hour by hour basis and it dawned on me the stress that must cause, especially in light of recent market movements.
For the record, I do not do that with my own money. There is no point. I would also not be around for long.
What risks does excessive monitoring cause?
I’ve heard many statements regarding markets ‘going’ up, or ‘going’ down. As we’ve mentioned before, that can often lead to knee-jerk reactions where you jump a queue at completely the wrong time, and indeed this was covered in the last quarter for the same reason.
Markets never, ever use the present participle. They are never ‘going’ anywhere.
They are simply where they are, and valued accordingly. The key decision is down to assessing an extraordinary amount of (always contradictory) data to then ask – where will they be tomorrow or the next day.
There are obvious points in your financial life to exit financial markets, but they relate more to one’s inability to deal with downside risk (i.e. nearing retirement) and see the market as toppy and don’t expect to go back in, or are happy with the current return and want out.
Remember, it is very easy for certain unscrupulous organisations to create volatility, then benefit from it by betting on upward and downward market movements.
Much volatility seems to be coming from the words of a man, most notable for his lack of ability to string a coherent sentence together without an autocue, a man who was the front of a ‘reality’ TV show. Yes, really, that’s what he did.
If I ran back over his quotes, some of which are long sentences, I can't help but think how someone with his business acumen would have got there without his Facebook friends, yet each sentence appears to give the markets a jitter, despite most of them being forgotten about (bans on Muslims and transgenders are just distractions). It is quite astounding – a stage indeed.
So is a trade war a potential? Possibly, but the U.S. would not like that and would be badly affected. Domestic inflation would rise and equity markets would tank. It would indeed have global implications.
Trump would be toast in the next election.
Perhaps he is worried, as previous governments have been, about the continued success of China and wants to slow them down. Might we next hear him talk about rekindling the Trans-Pacific Partnership (TPP) and attempting to ostracise China? China’s Belt and Road initiative is aiming to gain huge returns by financially investing in roads, railways and ports across Asia and numerous countries are concerned about the success this may have.
Whilst Trump is of the belief he doesn’t need to be part of a TPP to achieve the best results for American workers, a move to re-join the group, which has already moved ahead now without the USA, will create another aggressive move toward China.
The group met in November and renamed themselves the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, formally signing in March 2018, but altering 22 of the previous provisions that the USA liked and the others didn’t. Trade wars everywhere!
In January, the US and UK signed an interest in setting up the TPP again after Brexit. More potential trade wars. Meanwhile, we just have to ask if he is just doing his embarrassing peacock walk again, and/or what impact would all of these separate arrangements (which of course all exclude China) have.
Undoubtedly some see China’s current weakness as an excellent opportunity to slow them down so the coming months could be touch and go, but that is either way of course.
Mr Harket, Trump’s economic adviser, sees a buoyant stock market as proof he is indeed ‘the man’. If investors sell out, markets nosedive, Trump’s plan backfires, and he will have to back down and so, markets soar, so queue jumping becomes a fool’s game again.
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