First thing – the 700 point fall today was quite painful, and countries all over the world have fell with Indonesia falling as much as 9% in one day. The market in general has been quite volatile, and talks of a double dip recession are gaining currency. People don’t talk about decoupling as much as they used to and to my mind there is only one way to think about decoupling – the way Sandip Sabharwal described it – that the markets will have different fortunes over the long run, but in the short term they will correlate quite strongly.
Sticking to the plan
I have touched upon my thoughts on the uncertainty and different asset classes only recently so I’m not going to say the same things again. Investing in equities for the long term means that you believe that a country and companies in that country will continue to grow earnings many years down the line and the stock market will reward such companies. I don’t think any of that has changed. I bought some stock today, and will continue to do that in the days to come even if the market were to fall fifty or sixty percent from here.
NCDs might offer a new opportunity in this volatility
The NCD market is relatively new, and the NCD listing was played like the IPO listing game by punters – if the market continues to get beaten in the next few months – I think some of that pessimism can flow through to the prices of NCDs as well, and make them attractive relative to risk. That can push yields higher, and make it attractive to invest some part of your money in NCDs as well. This is a good space to keep an eye on.
Gold is just another asset class
I don’t think gold can be considered a safe haven any longer with the kind of speculative money that’s invested in it, and the kind of daily movement it sees. Something that moves more than 2% in a day this frequently is far too volatile to be considered a safe haven in my opinion.
The premise that it has a negative correlation with stocks is going to be severely tested in the days to come.
While most of the focus so far has been on Europe, I see increasing mentions of risks in Chinese real estate, and slowing down of the Chinese economy and how that will hurt the market. It won’t surprise me to see the focus turn from Europe to China in the next few days.
Finally, under which tree are all the people who say you should be greedy when others are fearful hiding?