Click here to get this post in PDF
The past 18 months of trading activity have seen a lot of volatility, to say the least, but also a lot of gains – many indexes are at higher levels than ever before. CNBC highlights the fact that a taper is widely expected; the Fed is being thumbed to reign in their $120 billion bond issuance program. With that will come a new, and more uncertain market. Sectors like tech, communications and deliveries have seen huge surges, driven forward by the stock market boom and consumer trends. How that changes is not so certain, and only those investors with the best research will be able to adapt.
Importance of diligence
Underpinning the work of any committed investor are trading journals, which provide a complete and detailed record of trades and acquisitions made within a timescale. This has been a crucial bit of kit over the past eighteen months, as the types of markets and what consumers are pursuing have changed so radically. What this will also help to show is that there is no need to panic; as the USA Today outlines, the current downturn is gradual, a 30-day change, rather than something sudden and explosive. Well-documented trading journals can help to map out such changes and trends and keep you stable. That being said, an eye towards macroeconomic change could point towards further volatility.
China’s wild week
China has recently experienced a stock market crash in what Bloomberg has described as a ‘wild week’. With changes expected from the Fed, that can’t have come at a worse time – and MarketWatch outlined why. Small-cap stocks are likely to be severely impacted, especially those that are listed from China, where a crackdown on various tech industries is underway. Once again, the researcher will be happy, and perhaps even profit; there are gains to be made in such a market, with the impact of a tumultuous change like that going on in China pushing on to established Western companies.
This crackdown in China is matched with a general malaise in the USA. Bloomberg reports that Amazon has been at the forefront of a general tech retreat on the markets, showing a clear decline away from the trend of 2020-21, where tech reigned supreme over every home worker in the country – and across the world. Once again, however, in-depth research exposes the value behind this. The market is only so big; there is a finite amount of cash. That capital is moving into the businesses and markets that are just now starting to get going again, like those related to construction and infrastructure.
The forces pushing the US market around are imbalanced. China is, on one hand, suffering from its own legislative change; the sinking of tech in favour of traditional markets is on the other, creating an uneven market. Volatility is rife and will only increase with the proceedings of the Fed symposium – be prepared.
You may also like: Quantitative trading – A sound investment in a bear market
Image source: Pexels.com