Dr Tee has been sharing his views on market outlook over the past 6 years of Invest Fair (2014-2019). The stock market condition each year is unique, a result of complex interactions with other investment markets (commodity, property, forex, bond), major economy and global political events.
In year 2019, stock market continues to be bumpy, especially for US and world stock markets at high optimism level. Dow Jones Index drops by 800 points over 1 day recently due to news of inverted bond yield (US bond yields, 2 years is higher than 10 years) which has been a reliable market recession signal over the past few decades.
Dr Tee has shared the following 4 major signals in Invest Fair 2019 to monitor for Global Financial Crisis:
1) Stock Market
Both world stock market and US stock market are falling down from higher optimism of over 75% optimism to current 63% Optimism, forming triple top with 3 trials so far. Political economy interventions (eg. cut down of interest rate or gentle ending of US-China trade war, etc) could prolong the bull market but the global stock market may require a crisis to reborn, forming another decade-long of natural market cycle.
2) Bond Market
US government bond yield is generally aligned in direction for longer term with stock market. With both short term and long term bond yields are falling downward from critical 3% to less than 2% (Optimism currently at 36%), money could be flowing at faster rate from stock market to a more defensive bond market or keeping as cash in banks. The inverted bond yield in US (especially for 2 years bond yield to exceed 10 years bond yield) is a risky signal for stock market, historically over the past 50 years, leading to 7 global financial crisis after 6-18 months when signal was observed.
3) Global Economy
US economy is still strong, job market (unemployment rate of 3.7%) is near the best performance over the past 50 years. However, the rest of the world (50% of world economy) are slowing down, including Singapore with current GDP growth rate of only 0.1% (42% Optimism with bearish trend). At the same time, US GDP growth rate is 2.3%, showing early sign of weakness with 71% Optimism in economy after falling down from past high level of 3% GDP.
4) Black Swan
Usually global financial crisis could be formed only after earlier 3 signals are aligned: falling down from high optimism global stock market, bond market and economy. However, an unexpected black swan (any negative global events, eg. political economy – US-China trade war, forex crisis, property crisis, commodity crisis, large-scale war, major natural disaster, etc) could trigger to accelerate the pace or prolong the duration of global financial crisis.
Externally, the uncertainty of US-China trade war continues to be a threat to global stock market, especially Trump’s first term of US presidency would last till end of year 2020, drastic change in political economy becomes a possible black swan. There is also risk of currency “war” if major economy choose to weaker own currency to have unfair advantage in export.
Trump may introduce more stimulation to economy (eg. requesting the Fed to cut more interest rate) over the next 1 year if want to keep the S&P500 at high optimism to show as report card to voters before running for second term presidential election next year.
“Crisis is a crisis” for those who are ignorant, junk stocks could go bankrupt in business, while blue chip stocks may also fall down in price with more than 50% capital loss. “Crisis in an opportunity” for those are prepared from now, learning to take the right actions (eg. sell high before buy low again for strong fundamental stocks, or position with short term trading in current stock market to profit from market volatility).
Learn from Dr Tee on 5 critical strategies to position in current stock market (LOFTP – Level / Optimism / Fundamental / Technical & Personal Analysis), profiting from global financial crisis with early preparation. Sign up for free 4hr stock investment course by Dr Tee.
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