Falling Market Strategies

free4440273

Shanghai Composite and Hang Seng look eerily similar to what happened to the Nasdaq just before the 2000 dot com bubble burst. Even if Wall St. goes down, the Hang Seng just keeps on rising...anyhow, this might sound trivial in the overall scheme of things but the nearer we get to December (and Xmas) the less chance of a correction. Correction certainly on the cards but probably Feb/March. On the other hand the Fed might well slash rates to one per cent by then to avert the likelihood of a recession (as it did post 9/11).

Edit: I actually think the UK and Europe have a far bigger problem or two: EU inflation up from 2.1 to 2.6% and the Euro/$ @ 1.4454. That must hurt:eek:

wombat42_2

free4440273 wrote: »

Shanghai Composite and Hang Seng look eerily similar to what happened to the Nasdaq just before the 2000 dot com bubble burst. Even if Wall St. goes down, the Hang Seng just keeps on rising...anyhow, this might sound trivial in the overall scheme of things but the nearer we get to December (and Xmas) the less chance of a correction. Correction certainly on the cards but probably Feb/March. On the other hand the Fed might well slash rates to one per cent by then to avert the likelihood of a recession (as it did post 9/11).

Edit: I actually think the UK and Europe have a far bigger problem or two: EU inflation up from 2.1 to 2.6% and the Euro/$ @ 1.4454. That must hurt:eek:

I am not saying that Shanghai Composite and Hang Seng will never crash but they are currently buoyed by the huge amount of money and liquidity sloshing around in China. There is a chance that they wil continue to outperform the rest of the world for the long term - they dont have credit crunch problems for a start.

My own basic defensive strategy is to diversify by buying global funds.

purch

They said that over a 9 year period the markets tend to flip between Bonds or Equities as the favorite investment type

Bonds have been largely forgotten about as a source of Investment Growth over the last decade ot two.

Having a security that will pay you a guaranteed X pct every 6 months ( and with the magic of compound interest actually pay you far more the stated coupon ), and also guarantee to repay your full capital in the end of the term used to be the favourite way to secure Investment growth.........before the cult of equity took over.

I am not saying that Shanghai Composite and Hang Seng will never crash

Just looking at a basic line chart of the Hang Seng scares the life outta me...especially the steepness of the climb over the last couple of months. The index has managed not to drop below, in fact not get even close to the uptrend line...but if it does :eek:

PS I'm reducing my equity exposure and I'll probably buy a couple of Gilts and hold to maturity ( hopefully HM Gov will be able to repay )

jon3001

I think the key is to build an 'all-weather' portfolio consisting of different asset classes. So as well as diversifying within an asset class (e.g. for equities having classes such as domestic large-cap/small-cap/value, Europe, USA, Japan, Far-East, Emerging) you also diversify across asset classes. So your portfolio would also consist of cash, bonds, property and commodities.

From what I've read you can expect similar long-term returns from equities, property and commodities. These are also uncorrelated asset classes so hopefully a bear market in one asset class will be offset by a bull market in another.

Choosing an allocation and rebalancing annually is vitally important to lock-in gains and move funds into undervalued asset classes.

Having said that I'm still building my portfolio and don't have an allocation to US equities or property since I'm bearish on those. I'm keeping an eye on these but it does smack of market timing.

I'm building a 20% exposure to commodities (mainly through ETCs) over 12-18 months to ride out month-to-month volatility.

Jonbvn

kittie wrote: »

the market is back on its long term uptrend. I have been buying shares during each dip in the last few months, having sold at the peak

I would not agree with the first sentence. Due to the ongoing credit crunch some sort of correction in the short term looks likely. However, in your position you are well set to weather any storm.

To be honest the increases coming out of CHINDIA are looking very scary to me. I was looking at some graphs this morning, and you would have sworn that it was the trajectory of the space shuttle.:eek:

[Deleted User]

volatility is the name of the game at the moment, however the long term ukx trend is still firmly in place. I do have reservations about world stock markets, so any stock buying is within ftse blue chip defensives and to that end I sold my retail stocks yesterday and today. I now sit on some cash and will await any dip

free4440273

free4440273 wrote: »

Shanghai Composite and Hang Seng look eerily similar to what happened to the Nasdaq just before the 2000 dot com bubble burst. Even if Wall St. goes down, the Hang Seng just keeps on rising...anyhow, this might sound trivial in the overall scheme of things but the nearer we get to December (and Xmas) the less chance of a correction. Correction certainly on the cards but probably Feb/March. On the other hand the Fed might well slash rates to one per cent by then to avert the likelihood of a recession (as it did post 9/11).

Edit: I actually think the UK and Europe have a far bigger problem or two: EU inflation up from 2.1 to 2.6% and the Euro/$ @ 1.4454. That must hurt:eek:

.25 cut it is: not long to go till just 1%:rolleyes:

zzzLazyDaisy

I have recently switched some of my gains into Blackrock uk absolute alpha fund and the similar Skandia fund. These funds have the ability to go short in a falling market, so should weather any volatility. It would probably lag behind in a rising market but I am using it as a short term home for funds that I don't want to take out and hold in cash.

wombat42_2

kittie wrote: »

volatility is the name of the game at the moment, however the long term ukx trend is still firmly in place. I do have reservations about world stock markets, so any stock buying is within ftse blue chip defensives and to that end I sold my retail stocks yesterday and today. I now sit on some cash and will await any dip

I am not sure why you think the UK is a safe haven - it is as exposed as most other countries to the credit crunch.

Chindia and emerging markets are a relative safe haven from the credit crunch but they are probably now overvalued.

[Deleted User]

IMO we are already in a bank/property bear market, just look at teh huge short sales on a lot of these stocks.