Dark clouds are looming ... expect a rough ride in the stock market in coming months.
Written by @长线投资不投机
STI had a good run over the past 1 month, up by about 9% from the lowest point in early March. As a long term investor, I should be happy as my portfolio indeed has grown. But I am not really smiling today; as a fundamental analyst who believes that the stock market should correlate to economic occurrence, I don't see the market running up supported by strong fundamentals... In fact, now I see evidences that the market is going for a significant correction:
1. Inflation and Interest Rate: Inflation has been a problem before the Ukraine crisis and now is worse. The sharp increase in prices will disrupt business operations and curb demands. Interest rate is expected to increase to counter the high inflation. This will slow down the economy. Eventually, all these will hurt the bottom line of businesses and hence the stock market.
2. Ukraine Crisis: It seems that the current conflict between Russia and Ukraine is going to be longer. Some reports even suggest that it can drag over years. The disruption caused by this crisis in terms of supply chain and business activities in Europe and eventually globally will be significant. Again, this will be a drag to the global stock market.
3. Covid Situation in China: More COVID cases are reported in China and it seems to be worsening. As China is maintaining their "Zero Covid" policy, we do expect more lockdowns to happen. This will further stress the already battered supply chain and business activities situation.
So when will the correction come? will it really come? How deep will the correction be?
If history is a guide, Mr market is unpredictable... I have no answer to the above, but I want to be prepared for a storm... if it doesn't come, good. If it does, I am ready to get into the market at undervalued prices!
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But there is opportunity in every situation.
War make gold high price and coal price become expensive, good dividen yield for stock holder 😁