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Investment

The world's largest wealth manager explains why traders should stay invested amid the market's latest downturn – and offers 3 specific recommendations | Markets – Business Insider

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  • The stock market sharply sold off this week just days after the S&P 500 hit a fresh record high and notched its best August performance in 34 years. 
  • “We view the latest sell-off as a bout of profit-taking after a strong run,” said Mark Haefele, the chief investment officer of global wealth management at UBS, in a Friday note. 
  • Haefele said that investors should stay the course according to their previous investment plans, and offered three recommendations for staying in the game amid the recent market downturn. 
  • Read more on Business Insider.

The stock market’s latest selloff shouldn’t spark concern or prompt investors to make any sudden changes to their portfolios, according to the world’s largest wealth manager. 

The S&P 500 fell sharply Friday just days after hitting a fresh record high on the heels of its best August performance in 34 years. The Dow Jones industrial average and the Nasdaq also slumped, reversing gains from earlier in the week. 

“We view the latest sell-off as a bout of profit-taking after a strong run,” said Mark Haefele, the chief investment officer of global wealth management at UBS, in a Friday note. “Stocks are still well-supported by a combination of Fed liquidity, attractive equity risk premiums, and an ongoing recovery as economies reopen from the lockdowns.”

While the S&P 500 is now sitting roughly at UBS’s target, there’s also further upside that could be driven by a coronavirus vaccine or “positive medical developments,” a new stimulus bill from the government with an election outcome favorable to growth, and a real rates dropping further, according to the note. 

Read more: Bank of America lays out the under-the-radar indicators showing that huge swaths of the stock market are ‘running on fumes’ – and warns a September meltdown may just be getting started

Investors should thus stay invested according to previous plans, according to Haefele. Here are three recommendations he has for investors. 

1. Ease into markets 

Heightened volatility can be scary, but shouldn’t mean investors get stuck on the sidelines. “Rather than trying to time the market and potentially miss out on gains, we recommend an averaging-in approach by establishing a set schedule to commit capital to stocks within a 12-month timeframe,” said Haefele. 

He also recommended a “put-writing approach to enter markets defensively, for those investors who can implement options,” and “making use of structured investments to add asymmetric exposure to stocks, e.g., with a degree of capital protection.”

Read more: US Investing Championship hopeful Matthew Caruso landed a 382% return in the first half of 2020. He shares the unique twist he’s putting on a classic trading strategy – and 3 stocks he’s holding right now.

2. Diversify for the next leg 

“The mega-cap IT complex has driven an outsize portion of the year-to-date gains in the US equity market,” Haefele wrote. “But while we don’t think tech is in a bubble, we do recommend that investors with excess exposure to the biggest US stocks consider rebalancing into areas accelerated by COVID-19, such as companies exposed to the 5G rollout, and sustainability-aligned companies set to profit from a ‘green recovery.'”

3. Protect against the downside 

“COVID-19 has brought unprecedented uncertainty for investors, and further volatility cannot be ruled out,” said Haefele. “Diversification across asset classes and regions is the best way to manage the risks in one’s portfolio.”

That being said, Haefele added that investors will need to seek alternatives to portfolio diversification because of how low starting yields are on high-quality bonds. He recommended gold, which he sees as having further upside potential, and “including some exposure to hedge funds with a strong track record of downside risk management,” to insulate portfolios. 

Read more: ‘Never been so extreme’: A renowned stock bear says today’s ‘hypervalued’ market implies the worst market returns in history – and expects a 66% crash from today’s levels

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

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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.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Economy

S&P/TSX composite up more than 150 points, U.S. stock markets also higher

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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.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Investment

Crypto Market Bloodbath Amid Broader Economic Concerns

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Breaking Business News Canada

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.

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