Towards end of the year, often investors look forward to a run up in share prices. Some look forward to the Capricorn Effect which is expected to happen at the start of the new year. Could it happen again or would the mountain trekking herbivore do a disappearing act?
Personally, I am sticking to my plan of holding on to dividend generating investments and not adding unless compelling value is evident. I do not know if the bear is going to strengthen or if the bull would make a dramatic return. I definitely do not know when either scenario might happen.
There is quite a bit of pessimism and fear in the air, that we know. Whether we have hit extreme fear and pessimism, I am not so sure but people (including myself) are still looking forward to that big crash before we roll out our warchests. So, I suppose there is still some optimism and hope.
Conventional wisdom would say that when the last iota of hope has been crushed, we would see the market bottom. That would be when no one wants to talk about stocks anymore. Be savvy. Be brave. That would be when we pick up undervalued stocks with abandon although we might not talk about them. ;)
You might be interested in reading the following article for some expert opinions but I would say to anyone that it is important to have a plan in place and act upon it when the time comes. Do not get distracted by the news:
Article in CNA: Investors brace for bearish market.
Bear:
"Sani Hamid, director of wealth management at Financial Alliance, said: "What I suspect is that this market still has a bit way to go to downside before it burns itself out, which is a point of capitulation whereby everybody is just really gloomy and bearish. When the situation reaches that point, I think that's when markets will bottom."
Bull:
Mr Brice said: "Ultimately we believe that we will get that rebound and that quantitative easing in the US will happen in the first quarter of next year. And we believe eventually Europe will get its head around the problem and gradually move towards some sort of resolution. We do believe we will see progress there. In that environment we could see quite a significant risk rally."
Related post:
No change to my plan as I plan changes to my life.