Investors can observe the emotions of market and how they affect stocks in both ways. For the last few years, when the global economy was lagging, news of the US interest rate hike was seen as a negative factor.
Now, interest rate hike becomes a neutral or even positive news as the market assumes that it means the economy is strong. Therefore, the stock market and other investment markets (property, etc) will follow an uptrend.
The stock market is emotional, and people interpret the market based on the mass market sentiment, following the herd mentality. If we were one of the sheep in the herd, our investment performance might just be average.
If the market is a zero-sum game, who will pay for the people who are making money? Unfortunately, some people need to lose money.
Ein55 Investment Style #22 (Blessing in Disguise) describes exactly the relationship between the stock market and economy over the last few years till now.
When I taught this principle several years ago, some graduates might not have fully understood why it was a blessing disguise until they have observed the QE tapering about 2 years ago and the US interest rate hikes over the past few years.
Ein55 Investment Styles will be better appreciated if we could relate to stock market behaviours. This is the reason of my sharing from time to time here.
In many earlier public workshops and investment eBook (Market Outlook), I have also pointed out that both QE tapering and US interest rate hike would become blessings in disguise.
However, this opportunity is more suitable for a trader to ride the uptrend and one must know when to get out from the uncontrolled roller coaster when it reaches a new peak one day.
However, a blessing in disguise could also become a real crisis when more people are optimistic. Pay attention when the US interest rate is over two- to three-percent range. That’s when a black swan may fly in quietly while others are celebrating the bull.
The unique Optimism Strategy developed by Dr Tee provides a special advantage to know which investment (stock, forex, property, commodity, bond, etc) to buy safely, when to buy, when to sell, including the option of long term holding.
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