The market has only been trading for about 3 days since we enter 2017 and it has been on a strong run upwards.
The STI for instance, has increased by about 70 points for the last 3 days and it looks like it will continue to surge higher upwards. They are still reasonably cheap by historical standards and it does looks like valuation will revert back to the mean even when gdp and earnings expectations for 2017 are not going to be fantastic.
It appears that 2017 will be a period of slow growth when various sectors are still uncertain about what are they trying to expect from the economy. In Singapore, growth is going to slow down over the next couple of years and it’ll be interesting to see how the government is going to steer the monetary policy comes budget next month.
It feels to me a bit like the market has taken a bit of complacency here since Trump won the US election. From an extreme gloom scenarios before that, positive news and optimism seem to surround the market these days with headlines hitting investors who are left behind chasing the market. This is the definitely the catalyst start for the next correction / recession in the stock market, when valuations go up faster than the earnings or expectations.
I try not to bet on predictions and this is the same reason why I’ve been on the market one way or another. At the moment, my holdings in equities stand at 70%, which is a good allocation in my view. The rest of the 30% can be used to pounce on opportunities should they arise.
During this period where we are unable to spot any compelling opportunities, it is important not to get into the head thinking of trying to strike every single bat. It pays off sometimes to be patience and quiet on the transactions and not be forced into making a mediocre transactions. This is something I’ve been constantly reminding myself everyday.
Meanwhile, it is important to continue to follow the progress of the company we are vested or interested in and continuously preparing for extensive research even during moments where there are nothing to buy.
A one-off impactful scenario will easily create an irrational panic scene where we will see fear in the market and that’s where the big money is laying on the floor for us to swipe.
Being able to insulate our thoughts and emotions from herd investing allows us to think calmly and deeper into our strategies and revisit them again when the temptation to deviate is near to us.