1) It’s doom and gloom almost everywhere you look…
After a late drop on Wall Street overnight, the Australian Financial Review (AFR) this morning says: “Australian equities are poised to start the month of September considerably lower, amid fresh selling in New York as investors position themselves for ever-higher interest rates.”
According to Mike Wilson, Chief US Equity Strategist and Chief Investment Officer at Morgan Stanley, US equity investors should be prepared to suffer more as indices have yet to bottom for the year.
“June was probably the bottom for average stocks,” he said in an interview on Bloomberg Markets, but the index’s directions are “down for at least [the] the next quarter or two.”
“September is usually the worst month of the year,” Wilson said.
Right at the right time, the S&P/ASX 200 Index (ASX:XJO) is trading almost 2% lower on Thursday.
two) Welcome to the month of September, “generally the worst month of the year,” according to Sam Stovall, chief investment strategist at CFRA in New York, as reported by Reuters.
This comes after US markets posted their weakest August performance in seven years. For the month, the S&P 500 lost 4.2% and the NASDAQ fell 4.64%.
By comparison, here in Australia, we had a decent month, with the ASX 200 index gaining 0.6% on the month, as gains in resource stocks offset losses in companies such as Domino’s Pizza Enterprises Ltd (ASX:DMP), Bendigo and Adelaide Bank Ltd (ASX: BEN), and ASX Ltd (ASX: ASX), down 12.3%, 12.2% and 11.1% respectively in August.
3) It’s been a decent ASX reporting season, highlighting mining stocks’ dividend windfalls, with windfall dividends declared by the likes of BHP Group (ASX: BHP), Fortescue Brass Group Limited (ASX:FMG), and Woodside Energy Group Ltd (ASX: WDS).
But that might be the best it can be for a while for mega-cap mining stocks. Earlier this week, Bloomberg reported that the price of iron ore had fallen below $100 a tonne for the first time in more than five weeks on signs that the crisis in China’s steel industry is worsening.
“Output in China’s vast steel sector is already well below last year’s pace as the industry reels from a housing crisis that shows no signs of abating.”
According to AFR, London-based Liberum Capital has a sell rating on BHP and Rio Tinto Limited (ASX: RIO) actions. It could be a case of taking the dividends and running.
4) With gasoline prices skyrocketing, the war in the Ukraine raging, and Woodside having tripled its interim dividend, you’d think the price of oil might be going up.
Not so fast, as Bloomberg reported that oil posted its third consecutive monthly decline, its longest losing streak in more than two years on concerns that tighter monetary policy and China’s economic slowdown will hit demand for oil. raw.
Add to that that Europe is almost certainly headed for a deep recession, with the US being a mild recession at best, and the outlook for oil does not look so rosy.
Add it all up, and the ASX 200 could last a few months.
5) A few hectic months will likely pale into insignificance when looking back five years from now.
Even the global financial crisis, the most painful period in recent history for investors, is but a blip in the stock market’s long upward progression.
And, for those who think they could sell now and come back to the market later, once the recession dust has settled, a few words of caution…
- The stock market is not the economy. A beast with a vision of the future, it anticipates recessions and recoveries. See June of this year, when he looked to 2023 the first interest rate cutseven though the RBA and other central banks are currently in the midst of a hike cycle.
- To benefit from market timing, you need to make two correct decisions: selling and buying. It’s hard enough to get one right, let alone two.
- Wells Fargo research suggests that missing some of the best days for longer periods of time dramatically reduces the average annual return an investor could earn by simply holding their equity investments during market sell-offs. Separating the best and worst days can be difficult, as they often occur in a very tight time frame, sometimes even on consecutive business days.
If you’re investing in the stock market, you should think of it as a lifelong endeavor, not one to get in and out of depending on your mood, the mood of the market, the economy, the government, or inflation.
6) That doesn’t mean you can’t make changes to your portfolio. In hindsight, like many others, I should have sold some of my tech stocks at a loss when it became clear that inflation would not be transitory, something that would require central banks to raise interest rates rapidly.
Then there are the genuine investment mistakes. The best investors only get six out of 10 selections correct. When your investment thesis turns out to be wrong, sell and move on.
At the end of June, I thought they bombed the initial public offering (IPO) Doctor Care Anywhere Group PLC (ASX: DOC) was a bargain. The company was liquidated debt-free and grew rapidly, with an upward trend in remote primary health care.
Everything was looking good as Doctor Care Anywhere’s stock price quickly shot up from my purchase price of 14 cents to nearly double in mid-August.
Move over Warren Buffett, I was thinking, there’s a new investment genius in the house!
A few days later, the company revealed that it had experienced problems with the platform, accompanied by a severe shortage of doctors in the UK, prompting not only the departure of the CEO, but also an inevitable profit warning.
Naturally, shares in Doctor Care Anywhere took a dive, and I headed for the exits as fast as I could, luckily still making a small profit, but only courtesy of a hefty dose of luck. Today, shares of Doctor Care Anywhere are trading at just 10.5 cents.