Economy and stock market are closely related, as if Master (economy) walks the Dog (stock). Master (economy) usually moves slowly but Dog (stock) is more active, responding fast to changes in environment (financial or political markets). The Master may walk several Dogs (stocks, properties, commodities, forex, bond, etc) at the same time, each Dog may respond differently (eg. Bond may get more attention when Master or economy becomes weak).
For an investor, we need to monitor both the Master & Dog, are they moving the same direction (uptrend)? Are they strong giants (strong country economy at Level 3 & stock with strong business fundamental at Level 1). What are their optimism levels? Are correction in investment markets, fear or weaker fundamental driven?
Currently trader war between US and China is mainly driven by Trump with complicated considerations, unlike usual black swan (global financial crisis) which is both a systematic & unsystematic risk. Trump may need to monitor S&P 500 index regularly to know when to adjust the political strategy. When S&P 500 is corrected below 2500 points, fear driven stock market could evolve into weaker economy driven stock market, could be too late to reverse then.
“Wolf is coming” may end up into a real big bear market (when S&P 500 falls into or below 1500-2000 points) when real economy is hurt by falling in stock market below the critical level. Many people’s wealth is based on investment market (stocks, properties, bonds or even cryptocurrencies, etc), capital losses or reduction in capital gains would result in cut down in spending or investment, the downtrend price and economic cycle may get worse this way.
If Trump takes reverse action in trade war by end of 2019 (eg. finalize agreements with other major economies such as China, Europe, Japan, India, etc), the timing may be just nice for year 2020, creating a nice intermediate correction, stock market rebound to support a mid-term bullish or side-way market to support the second term US president election.
Economy is a slower indicator, when it is confirmed downtrend, stock market could have fallen more than 50%. At the same time, stock price is a faster indicator, today falling down, tomorrow could recover higher. There is a balance in between, integrating these considerations in own LO-FTP (Level 1-4 + Optimism + Fundamental + Technical + Personal Analysis) strategies.
Crisis is always an opportunity for investment, including the current trade war between US and the rest of the world. However, a crisis could be a real crisis if one does not know how to position, eg. buy low get lower in stock prices, or even a business could go bankrupt during the bear market. The right way of crisis investing is to form a dream team portfolio of 10 giant stocks, overcome own fear to buy low and wait patiently for the recovery to sell high in future. It looks simple but without proper training, it could be a disaster for speculators.
Learn from Dr Tee free 4hr stock investment course to learn the integrated LO-FTP strategies for trade war investment opportunities in stocks, properties, commodities, forex and bonds.
