Saturday, December 22, 2018

Who Let The Fed Out?

I woke up this morning to realized that the US market has fallen for 3 consecutive days.

I seriously felt fine since I anticipate the drop in a post stated in November.

But this time round, it hit me quite hard because I was going to do my review for year 2018 soon. Since my portfolio has consist of some US counters, my paper losses will be more huge.

With that out of the way, I guess I felt really great moving into 2019. Whenever I look ahead, I felt kinda of excited and believe opportunities will arise especially for fundamental investors like me.

For those that are still in the dark, I felt it is time to summarize what had happened in 2018:

1. Since Fed hired Jerome Powell as the Chair, he has been on track to increasing interest rates.

2. As interest rate increases, fixed deposit interest rate becomes higher. Investors started to move their funds into safer haven with some many crisis calls. Less traders were in the market. Banks also increased their fixed deposit interest rate, such as CIMB giving 1.9% interest rate for fixed deposit.

3. Furthermore, Singapore Government also continued to increase the number of ways to save via Singapore Saving Bonds. Over $3.7 Billion has went out of the market and into Singapore saving bonds.

4. On the other hand, interest rate increases also caused companies and individuals to have a harder time in borrowing. Debt becomes more expensive and many companies started finding alternatives to finance debt.

5. For many individuals having floating interest rate on their existing mortgage, they also find it hard to even make monthly instalment payment. There are articles with headlines such as "High-end auctions on the rise in Singapore" and "One in four properties for auction in January to October is a posh asset" in the news recently that amplify the seriousness of the situation.

Basically, interest rate increases cause liquidity to exit the market. As safe haven yield becomes higher, the market starts to cool down and companies also start to slow down.

All these are happening as we see trade tensions around the world happening - US-China Trade War/Technology War and even our every own Singapore-Malaysia Ties.

Lets' also not forget that quantitative easing around the world is stopping.

In Short

If you are worried about everything that is happening around the world, may I suggest you re-read what I wrote previously:

Steps To Take In A Market Correction
More Thoughts From This Market Correction

I shall end of this post with this quote:

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