In a recent talk with managers at Nigel Stephens counsel, my Canadian investment manager, I realized it is about time for a short term stock market boom.
The end of the war in Iraq can be the event that kicks this off and the market could rise as much as 70% over the next three years. You can understand why by reviewing a previous message on connecting dots at https://www.garyascott.com/archives/2002/11/21/696/
The third chart in the link above shows how the 1968 stock market crash was followed by a series of mini booms and sudden busts over the next 14 years.
If you are an equity investor, your fortunes could be enhanced by this market momentum.
If you make a little money don't become proud and don't be fooled. This is just an uptick in a long term bear trend.
Be very careful because this rise will be followed by a sudden and sharp drop. Know one knows for sure if this recovery will start now. Plus trying to guess the market's timing is a dangerous way to invest. This first recovery could be much shorter than in previous cycles.
A long term review of Wall Street's boom-bust cycles in the link above also shows that some form of banking crisis pops up in the middle of the long term bear trend.
So, if you choose, start thinking more about equities at this time.
Personally, my view is “au contraire”! Rather than trying to catch a short-term equity wave, this is a time to liquidate portfolios that are depressed. Look at the possibilities of reducing your equity load and if interest rates rise with the market, shift into bonds as the bond market fluctuates. When equities suddenly drop again, interest rates are also likely to fall and bonds will profit.
Beware of pride that might lead you to think you have regained the golden touch. And just beware. No one knows what the future holds. A banking crash could well lead to an inverted yield curve (short-term interest rates higher than long term) which could also hurt bond values (and create more investing opportunity). So always maintain discipline and if you believe in a trend do not let this belief lead you to abandon principles of diversification and caution, (unless you desire to go for broke).
Until next message, may all your investing be good.
P.S. There are two reasons why Nigel Stephens Counsel is the only manager I let manage a discretionary portfolio for me. First, they use a triangular approach to building my personal portfolio. They look at market conditions for maximum growth. Second, they pay equal attention to risk management. Finally they match all this to my own liquidity and growth needs.
Also I like their overall philosophies and how they often spot major problems in the market ahead of the curve.
You can learn more about Nigel Stephens Counsel at https://www.garyascott.com/archives/2000/04/14/43/
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