The Dow Jones Industrial Average Index (DJI) has been on a bull run for seven years. Seven years. That was briefly after the Lehman Brother crisis.
That was also the time the US Federal Reserve decided to bring interest rates close to zero — the closest it had ever been in history — till December 2015.
Even in Singapore, the Straits Times Index (STI) recovered slightly after a whole year of bearish sentiment in 2015, only to face more resistance in the recent month.
What is going on exactly? Local stocks guru and trainer Daniel Loh, along with other investment experts at our half-yearly Shares Investment Conference 1H2016 (SIC1H2016), explained that we are currently in a state of global weakness.
Almost every major economy in the world is experiencing economic difficulty, except the US and its seven-year bull run.
However, it might not last any longer. Janet Yellen, US Federal Chairwoman, even mentioned recently in a letter on 12 May 2016 that she “doesn’t rule out negative interest rates“.
Daniel is bullish on commodities and here are three reasons why this might actually be the year of commodities, for the benefit of those who did not attend SIC1H2016 and are worried.
1. Stocks are Overpriced
Even without experts telling us, most people already know that the stock markets are not an easy place to be in right now — stocks are so overpriced.
Daniel started off his presentation with a question to the audience: is there any index in the world now that is capable of doubling its value?
The answer was obviously no. That could happen if a global recession — that sends indices and stock markets crashing down — were to hit us.
2. If Stocks Crash, Fall Back on Commodities
You might ask, what can we do now, then, if stock markets were to crash? Of course, the most logical thing to do is to stay away from buying anything at all.
Many experienced and veteran investors would tell you to never catch a falling knife; no one will ever know when prices will start rebounding.
Likewise, Daniel was being very frank: he doesn’t know when prices would rebound for sure. But he knows that commodities would be the way to go.
While precious metals are the first thing to come to mind, Daniel pointed out that investors who spotted danger earlier, are actually in precious metals already.
Commodities are the next best thing to turn to. In fact, commodities have been hit quite badly in recent years.
3. Commodities like Corn, Wheat, Soya Bean are at Historical Lows
As can be seen in the graphs above, Daniel pointed out that these food commodities that we eat regularly are at low and attractive prices now.
Of course, it is hard to say if these food commodities will be persistently low.
Daniel said that he expects a drought to hit the US in the coming months, which would send food commodities up the roof.
Also, commodities are at low prices now, the risk of holding commodities is a lot lower than holding stocks — how much lower can food commodities go?
Investors who are not fond of investing in precious metals can look at holding commodities, related stocks or even ETFs that are exposed to commodities, especially food.
Daniel also talked about picking certain commodities and ETFs using a technical analysis method.
The technical analysis method aims at identifying attractive entry points of counters that might be poised for an uptrend.
He will be sharing more in a 1-Day Technical Mastery Class on 22 May (Sunday) from 10am to 4pm.
Ticket prices are selling at S$48 per pax but if you use this discount code “SIC1H2016”, there will be a S$10 discount.
*Event will be conducted in Mandarin. Sales will end on 19 May (Thursday) 2016.