The Hong Kong demonstrations, Brexit, Canadian Election, and US impeachment proceedings are a few of the political events which will have an influence on global stock markets within the next couple of months.
One strategy would be to sell all stock holdings and sit in cash until things unfold. The problem is a few of these events could last much longer than expected or as in the US situation the impeachment proceedings will lead straight into the 2020 US election and the uncertainty it brings. Once an investor is in cash it can be very difficult to know when to get back in and you end up holding a large cash position much longer that you initially expected and earn interest payments of maybe around 1% to 2%.
The final outcome of these events could have long lasting effects on global markets along with increasing daily market volatility as the events unfold each day. What’s an investor to do?
It is hard to forecast which way global stock markets will move with any certainty for the next 6 to 12 months. The markets for the last 18 months have been basically sideways and that could continue for another 18 months. Based on my interpretation, I expect the markets to go higher. The FED (Federal Reserve Board) in the US is lowering interest rates and talking about maybe expanding the US money supply, so another quantitative easing. I see the FED’s financial stimulus more than offsetting the political events mentioned, especially if we stay more concentrated in North American investments which we have.
In summary we are basically fully invested with a more conservative bond & equity approach. If stock markets start to show signs of seriously breaking down we will look at raising cash to help control volatility. As we go through the end of 2019 in to the first quarter of 2020, I expect positive bond and stock market returns, but always watching for unexpected warning signs. I hope you had a good thanksgiving and as always if you have any questions or comments please contact me.
Bill Achtymichuk
