1. The passive investor who only know how to Buy and Hold, never looked at stock prices on day to day basis and completely sold on the Time in Market mantra and probably invested most of their super in equity funds and/or dividend stocks.
2. Investors who invest a sizeable chunk or almost all of their living liquidity funds on equities, with a material % allocation into small and momentum stocks.
In the event of a soon unfolding bear market ahead, those in the first camp, it would be a wake-up call and a 30-40% downdraft could imperil retirement plans, and procrastination would see them being late to avert it, because we are all wired to think super is for the long term and not to be tinkered with.
those in the second camp, are playing with money they probably can't afford to lose, if they consider possible prospect of an additional whammy in the form of job loss, though compared to the first camp, they stand closer to having the ability to cut their losses short as they have a more trading type mentality, and wait for a better entry level when the coast is clear.
There is no guarantee on any single scenario as to what is or will happen.
This thread has served to provide you with an evolving view of development in the macro economic and political landscape so we can all better decide. When I said Doing Nothing Is Doing Something - is not even thinking about one's position to decide either way. It is waiting to see what the price does next, rather than trying to pre-empt what is to come. If after your review of all that is unfolding, you have come to the conclusion that the market will bottom soon or has bottomed, then that is your bet to hold and stay pat. Or after your review, you have determined that there is more downside and elects to reduce your portfolio risk by a notch or more, then you have taken some risk management to reduce exposure. Or after your review, you take on a view that we can still do another 10-20% leg down, you could elect to step aside completely and/or take a short term short exposure to hedge your portfolio.
As I had said last week, the window is closing and that the rebound was a good opportunity to sell into strength. It wouldn't be such a good week next as weakness is likely to built into a bigger weakness. Because the belief of a 10% correction bottom is now waning, with great concern of morphing into a descend into bear territory as 'liberation' day arrives next week.
However, much of my thread's focus on geopolitical disorder is relating a thesis of America's Brexit moment that could shape the future of the US economy and markets for a generation, similar to events in UK Brexit, HK democracy crackdown, Nikkei 30 year malaise. It is a longer term threat to America's exceptionalism that changes all prior assumptions which made Buy and Hold prosperity a prospect that we have taken for granted.
It is Time to revisit and challenge what we have understood about economy and markets.
...on Monday till even yesterday, ASX market participants had the opportunity to seek shelter and get out of harm's way,...the markets were too complacent into believing either 'this tariff is all tactical negotiation' and/or 'buy the rumour sell the news'.
I mentioned that the window is closing and the rebound was a good opportunity to sell into strength.
....it is important to perhaps understand that Trump 2.0 has the powers to levy tariffs in a more conciliatory manner so as not to spook the markets if the markets are really as dear to him as it once was. And is it just a coincidence that hedge funds were selling in a big way in the weeks leading to this event, you don't think the hedge fundies had insider knowledge (?). So it is not at all crazy to think this could be all designed to make the markets go down deliberately in order to lower US yields and to bring the economy to the brink of a recession so to force Powell's hands into submission on lowering rates.
...on the economy, I think there are two main things Trump 2.0 wants- a lower longer term rates and tariffs to finance or part finance its large tax cuts, and a third being a lower dollar at some point in the future. And it is prepared to sacrifice the stock market as lambs to the slaughter to tighten financial conditions. The agenda is self serving for the billionaire cohorts in the WH. The rest can live the short term pain.
...so once the capitulation begins with the naive US retail traders, beginning tonight, it is a one way ride to the south for the markets. The dollar is getting sold down along with US stocks. Foreigners are ditching US stocks while US retail speculators are just waking up to the 'betrayal', and the shorts from instos would further compound the sell side.
...we are likely to visit bear market territory soon for the indices, but only to perhaps stop short because the President won't let it happen. But still, 5-6 months out, the bear could take a life of its own, and we could enter crisis mode by then.
