Equity Strategy is of great importance during downturns such as the one unfolding now.
This is a time when you need calm experienced friends who have been through this before.
So has Jyske Bank which is why I respect their comments on current market affairs.
In their recent equity strategy report they say:
“Nervousness in the market is a very difficult opponent indeed.”
Then instead of looking at the markets, the report discussed investor psychology because the key in times like this is the ability to understand when investors get nervous and when they become exuberant. Both conditions drive prices into unreal territory which creates opportunity for realistic investors.
Jyske’s report points out that investors are too often influenced by “other factors than purely rational ones”.
In other words though there may be panic, this is not the end of the world. In fact the world is fine and getting better. The value of what the economies of the world produce and sell is still growing in the long term.
There are few prospects that this will change in the foreseeable future.
Yet the market will most likely drop some more because as Jyske’s report points out, “Only seldom are the financial markets at rest.”
Jyske uses a large number of tools, from valuation to investor positioning to global economic development, to sentiment indicators. Yet they are clear that no matter how good their models “you can never fully incorporate what will happen if investors really get nervous.”
However the report shows contrary to 2001 when markets recovered after the .com bubble and equities were very expensive, shares are reasonable in terms of earnings development.
I could not agree more. For 40 years (this May), I have been watching stock markets rise and fall….yet everything always getting better…richer. Nothing has changed in this which means that the clean out we see now is just one more downturn that creates opportunity.
See our latest Multi Currency Update. Learn how the Green Portfolio’s recent plunge is similar to last years and how that drop created incredible profits. Become a Multi currency subscriber and receive Update 2008 – #8 . Go to www.garyascott.com/catalog/bldh/
Until next message, may all your downturns bring you great profit!
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