It’s A “Mistake” !
I made the “mistake” of buying the dip on Thu, 18 Apr 2024 to add to my existing holdings on Basic materials stock - $Vale SA(VALE)$.
According to $Morgan Stanley(MS)$, Chief Investment Officer, Mike Wilson, currently the 3 “stable” sectors will be:
Energy ( $Energy Select Sector SPDR Fund(XLE)$ ).
Materials ( $Materials Select Sector SPDR Fund(XLB)$ ).
Industrials ( $Industrial Select Sector SPDR Fund(XLI)$ ).
As part of my diversification strategy in investment, I try my best to put my eggs in different baskets.
I made the decision to “buy the dip” because I did not anticipate that Israel will counterstrike Iran, so soon - given their ongoing engagement with Hamas.
To launch an offensive retaliation means re-deployment of precious resources and a distraction to existing mission.
Nonetheless, Israel did. (see below)
It is strange that neither countries confirmed nor deny the retaliatory move (by Israel); despite speculative reportings all over the media.
What is more important is US market’s sentiments would have already been dampened, just by the news breakout.
As of now, US futures for the 3 major Indexes are in the RED: (see below).
Quite certain it will be a red-wash to cap off this week and (who knows) maybe into the next.
Expert Weighing In.
Do not just take my words for it, Wall Street veteran - Fundstrat, Hd of Research — Tom Lee has echoed the same sentiments. (see below)
In his notes to Fundstrat’s clients:
(1) Investors should not rush to buy the latest dip in the stock market.
There's a wave of selling that could see the market bottom out in the coming weeks.
(2) It is because volatility is rising, that could bring near-term pressure to stocks.
VIX index suddenly “peaked” on 19 Apr 2024 morning. (see below)
Higher volatility typically triggers selling among investors, Tom Lee warned.
Got to take buying the dip extra slowly.
(3) The market could be less than a month away from hitting a bottom.
This is because US stocks’ positive catalysts are still in play. Eg. Strong corporate earnings growth.
The S&P 500 index is on track to report earnings growth of over 7% for Q1 2024, per estimates from FactSet. (see below)
(4) The Fed also looks poised to cut interest rates sometime this year.
Where rate cuts could be delayed further than investors are expecting.
Markets are now pricing (maximum 2) cuts by December 2024, according to CME FedWatch tool. (see below)
Probabilities of a 0.25% cut in November and December stands at 42.6% & 34.4% respectively.
(5) Predicts US markets could hit a trough within the next month or possibly sooner, assuming that:
Middle East conflict does not escalate further.
Volatility eases.
Investors show signs that they are slowing their pace of selling.
"This pullback, is very good because it's providing good entry points," says Lee.
"All the fundamentals that are supporting stocks are still in place."
Wise words to be adhered in such trying times ?
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Do you think US market will continue to consolidate and until when ?
Do you think you will sit out this period with eyes wide opened, ready to jump in when the coast is “clearer”?
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