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Is it when,
or what, to buy?

market update author

"It's better to be roughly right than precisely wrong."

John Maynard Keynes

March gains, a strong month

So, the first quarter of 2022 comes to an end.  It’s certainly been a choppy start to the year. Gains in March for more developed markets have lessened the blow. So is it when, or what to buy:

when or what to buy table

Data table is from Google Finance

And, as is always the case with uncertainty, the USD gains against other currencies.  Even the AUD doing well given the current high cost of commodities. 

March market update

Data table is from Google Finance

The beginning of the COVID era in March 2020 is now two years in the rearview mirror.  At its lowest point that month we saw the S&P 500 trading at 2,304.  It was very nearly double that at 4,530 on 31 March, the close of the first quarter of 2022.

The month of March 2022 was also a volatile one, albeit with gains across developed markets, to bring 2022 losses to around 4-5%. 

Spring outlook: Inflation, Ukraine, Post-COVID

Given the challenging situation we face, with inflation particularly and of course the war in Ukraine, the markets are remaining relatively strong.  Volatility is going to continue, no doubt, especially given Putin’s tendency to play games – his making and breaking promises and the media reporting drive emotional trading.   This causes markets to move (either way) far more than they logically should.  As always, it’s times like these when a cool head is needed.  The buying opportunities earlier in the year for the value investor were clearly there, but as the old saying goes, it’s time in, not timing, that matters.  Investing in quality business at any time will serve you well, regardless of whatever else is happening in the world.

Spring has sprung in Europe, with the clocks in the Northern Hemisphere going forward.  This time of year always feels optimistic, with longer days, better weather, and families looking forward to a hassle-free summer holiday, perhaps their first in three years.

Consumer spending is on the rise, with Barclaycard reporting a 14% increase.  Friends over there tell me airports are busy again; Heathrow airport is looking for an extra 12,000 staff to handle the expected increase in business.

Even here in Asia, I have noticed that airports are noticeably busier.  China’s no-covid policies may not survive once the majority of Asia follows the West’s lead in realising we must be allowed to get on with our lives; this will be a boost for all concerned.

There are still factors we have to consider even with this optimistic approach.  Inflation has arrived here and at high levels.  Skeptics may say that the aforementioned increase in spending is due to everything being more expensive.  Interest rate rises are needed to combat this, though I can comfortably dismiss the idea that earning 1-2% on cash will mean lots of investors pulling out of stocks and into cash.

Should I buy now?

So, buying opportunities exist, no doubt, but investing is never as simple as that.  Most investors will need to pay more attention to detail in order to find the right pieces for their financial puzzles, not least when looking at geographical areas as well as sectors of the market.

The comparison between different country performances can be stark.  Right now China is struggling, whilst the US is picking up.  I’m often surprised when I see how much variance exists between countries’ market performances.  For instance, in the last six months, Denmark and Sweden, which you may correctly imagine have some natural correlation, show one with 3% gains (Denmark) and the other with 7% losses.

Often the underlying sectors play their part here.  In fact, the reason the FTSE has outperformed the S&P 500 this year is due to its heavy weighting in energy, by far the best performing sector, whereas the S&P has heavy tech weighting, an area which has been merely solid.  There are 11 sectors in the S&P; picking the right ones will help optimize growth. 

Should I consider buying outside the stock markets?

Non-correlated investments are also important.  I recently watched Trust No One, the Netflix documentary about a cryptocurrency platform that disappeared along with 100s of millions of dollars.  It just reinforced my view that whilst I see a future in this space as an alternative to more traditional sectors, investors in these spaces need to tread carefully. Over the last 12 months, despite its recent falls, the tech sector has gained 25%, while Bitcoin is down 22% in the same period. 

We all know the stories of those who have made millions in this space, but the clue is in the word “made.”  Those coming to the party now can still make money for sure, but I doubt we will see many more like the chap in the documentary last night who, due to the increase from when he bought Bitcoin, effectively bought his Lamborghini for $115!

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