February 2021 : Sell off or BUY ON?
The situation in the US is extremely complex but I'm going to try to explain this is as simple terms as possible.
This all boils down to the monetary policy of the US and involves multiple factors such as how the fed controls interest rates and circulation of money within the economy.
There are many of things happening concurrently so while we have some issues with bond rates, we also have worries of inflation and with that rising interest rates.
I'm no economist but one of the easiest concept to understand is interest rates. With this, investors are worried that the Fed will increase interest rates. In simple terms, it mean that there is a chance that it will now be "more expensive" to borrow money.
However, just to be clear here,
" The Chairman of the Federal Reserve Bank, Jerome Powell, has tried his best to assure investors and traders that the Fed is not even thinking of increasing the interest rate. This means that the Fed is far from making any decision to increase interest rates. " - Bloomberg
Coupled with this, we also have other factors in play like rising bond yield etc.
Now we have alot of speculation going on here and to be honest, no one can really predict how low the market will go. All I can say is that as a relatively new investor, whats happening now is nothing compared to March 2020. Back then, we were looking at stocks drop like 20% daily and tbh I was caught in paralysis as well. (Thats why still holding bags like singtel and starhill bought in 2019, sob sob)
Its safe to say that in this trading week, we haven't seen a 20% drop daily therefore, solely based on the severity of this sell off, I think that this is just a correction.
Also, as we understand the global level of optimism in general, vaccines are working, countries opening up (Singapore got some new business visitor thing, Thailand working on special tourism passport etc.), stimulus coming, AMC theatre opening up in NY again (one step closer to normality in the US) so really in general the world does not look as bleak as March 2020.
Having said that, I'm just a millennial behind a computer ranting on the internet so pls note that I am not a financial advisor of any sorts blah blah blah.
To sum up, the stock market is an extremely unpredictable instrument and the sell-off these days can really get to you if your emotions aren't in check.
In any case, mama wood is buying everyday and papa buffet also say this. But please, to be greedy also need to have limit.
Personally I've quantified what he means by greed and have divided my warchest to buy the dips in the market at 3 key support levels according to my TA of the Nasdaq index. Will cover this in my next post!
For the record, so proud of my wifey for making her first trade on this market dip!! Am helping her to managing some spare funds and decided to park it into ARKK, ARKW and ARKQ. <3<3