UPDATE – Aug 25, 715pm China cuts interest rate effective Wednesday
“Wait” that’s what I say to people asking me if the market selloff is over and it’s time to buy. I see articles and “gurus” talking about buying these “cheap” blue chips. I understand and also want to pick up bargains, the thing is, they could get even cheaper! AAPL was down to 105 level last Friday, but now just before open it’s at $99 (how low can you go!). There are experts who say the market is over-reacting, but I tell you what, the market is always right. Sentiment is just not improving right now, so why add to more losses? Some are busy talking about WHY the market nosedived. I wouldn’t worry about that now, I would be looking for how the market can recover.
What to watch out for : Economic stimulus – why the Chinese government “supports” the stockmarket the way they do like buying shares is just not going to work, they need to make the whole economy grow (not just the stockmarket companies stock price). The thing is, China has problems they want to address like too much debt (causing housing bubble and that stockmarket bubble – article here), and perhaps secondarily but still necessary to be fixed — poor environmental management, corruption etc so just the usual stimulus by way of interest-rate cut is going to make existing problems worse.
The US Federal Reserve can also add to optimism IF they hold off on the interest rates. But any real decision comes mid September so, there’s some waiting needed there.
We talk about this and more market moving actions in my Low-Risk High-Reward Investing Workshop and I am happy to announce that we will be offering it as a monthly webinar pretty soon!
Meantime, it’s a waiting game on what stimulus and other game plan will be on hand to arrest this downslide. It’s a bear market all around, except perhaps in the US, but it might come soon.