The market has witnessed the fastest fall in its history. Many stocks are available at extremely attractive or cheap valuations currently in the market. While the whole world is anxious about the nationwide lock-in and prospects of the ravaged global economy, some brave souls are hunting for the bargains. There are anecdotal stories that online brokerages are facing deluge of applications from individual investors. Some mutual fund investors are also becoming adventurous and talking about investing their surpluses in their favourite existing mutual fund schemes. Is it a good strategy?
Mutual fund advisors and financial planners are asking investors to tread cautiously and avoid adventurous steps in the current market conditions for two reasons. One, we have not dealt with a situation like the current one earlier. Two, it may present new challenges to you on health and professional fronts. That means you have to go to the drawing table and redraw your financial plan.
First, let us deal with the novel situation that has unnerved most experts. It is true that most investment experts typically ask investors to buy more when the market corrects significantly. However, you might have noticed that things are quite different this time. Most experts, especially the sensible ones, are asking investors to tread extremely cautious and do be adventurous.
“On logic based on historical data points , there is no doubt that this is a good time to start investing . However, I wouldn’t want investors to put in their entire surplus today. The world is dealing with a crisis and we don’t know how/when the market will emerge from this. Keep that in mind. If you have the appetite to take this risk, invested in a staggered manner over next 25-50 weeks,” says Subir Jha, Founder, BuckSpeak, a wealth management firm based in Hyderabad.
What is different this time?
You know the answer. Most of the market falls are based on some negative news, data, etc. However, this time we are dealing with a deadly virus that is striking across the globe and leaving many dead. It is playing havoc with the economies across the globe, probably leading to a severe economic slowdown and huge fiscal deficits.
The trouble is: most people can’t recall anything like this happening in their lifetime. That is what makes the predictions very difficult this time. We simply do not know how soon or how long we would be able to finish off the virus threat. Will the economies around the world bounce back once immediately? Or will it take a long period? So many questions, but no concrete answers to any.
That is why the sensible advice of wait for the clear picture is doing the rounds.
With that we reach the next point: uncertainties on our health and career fronts. Thanks to the forced isolation of people and complete national lock-down, the economy is going to suffer a great deal. Many businesses that are heavily dependent on consumption might be servery hit. Already many daily wage earners have lost their jobs and next is the turn of those working in small and medium enterprises. Unless the government offers incentives, many of these firms will be forced to trim their workforce or shut shops.
This will have a cascading effect on the economy and it might have some impact on your personal careers, too. Also, you should be prepared for a health-related emergency. These two uncertainties might force you to revisit your liquid investments and emergency funds you have earmarked for such situations.
Subir Jha asks investors to be mindful of the risk to their regular income in this critical time, as businesses get hit. “Avoid investing in equities , if your job is at risk . Take help from colleagues/seniors/ friends from similar profession , to assess this risk . These are unprecedented times and you shouldn’t risk your lifestyle for earning extra returns in the long term,” says Jha.
Many financial planners believe that the conventional three-to-six months’ living expenses may not be able to deal with the current situation. You should make sure that you have investments in liquid assets to take care of your living expenses for at least six to 12 months. This is extremely crucial to take care of any shocks from medical expenses and job losses. And it is very important if you have financial dependents or children.
Once you are through with the exercise, you may go for your bottom fishing and invest the money in your favourite mutual fund schemes.
“If you have a surplus (money that you do not need to use in an emergency or for short-term goals), you should invest. Investors should put money in every major fall. However, it is very important to be sure about two things. One, you don’t need the money for at least for the next five years. Two, stagger your investment over some months,” says Chokkalingam Palaniappan, Director, Prakala Wealth Management.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
