Investor Points of Few – Who Stays Wins


By Alan Steel

The ‘short term’ plans of mice and men often go awry…

Ok, so maybe that’s the Wall Street version of John Steinbeck’s classic line.

But surprise announcements, like today’s move for a snap UK general election, play havoc with what is already brittle stock market investor sentiment. It’s been that way for over eight years now – a near inexplicable emotional state in light of the record breaking market highs, and the relative health of the slow-burn economic recovery that’s been with us since March 2009.

Shock and Awful

That fear burns just under the surface.

And with every over-hyped shock and awe event comes a serious cases of investor knee-jerk reactions, the types of which tend to send Indexes whistling fast towards the ground.

Or so it would seem.

For those whose investor watches tick over in years instead of seconds, history teaches us that events wrapped in sound and fury rarely reveal a fundamental shift in global economic prosperity.

And the rebounds thereafter almost always show that slow and steady wins the race – they are the beneficiaries of those who buy high and then sell low in a panic.

All the Brexits, Trumps and Snap Elections…

Think back to the stock market dumps and subsequent recoveries around the Brexit Exit and Trump’s surprising presidential victory?

In simplest terms: Who stays wins.

Today’s FTSE 100, at the time of writing, had lost about 150 points since this morning, and the media red ink has been flowing out over every channel.

In fact, at 11.30am the headlines read “Pound plummets as May calls for…” showing a graph with a sharp fall of only 30 cents! Two hours later, in another less marked graph, the headline was “Pound surges against the Dollar…”

Confusion reigns supreme.

It will be interesting to watch out for a rebound over the next few days and weeks. 

Fear & Greed Indeed…

Today’s poster child for all the kerfuffle is the wildly popular image of CNN’s Fear / Greed Index (above). It shows the continuation of the eight-year, low-rev (read: near idle) investor sentiment support engine, complete with fiery red graphics and other such dashboard toys.

It’s neither new nor newsworthy. 

We would do well instead to heed the views of Ned Davis Research, who recently suggest that while we are likely in a short-term correction / consolidation phase, as longer term price and volume indicators are still bullish.

Couple that with the fact that stock markets don’t tend to fall into recession when investor sentiment is this low, nor when celebrity analysts and/or the investor herd consensus thinks they will.

Don’t mix politics with investing. They are an unwieldy pairing.

Get some good advice instead from someone who has a long track record of investment success.

Because after all, it’s your money.

Alan Steel, Chairman, Alan Steel Asset Management

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