An excerpt of Mr Goh Mou Lih’s interview with 95.8FM
Recently, global stock markets were rattled by a series of bad news arising from trade war woes and the US-Russia conflict over in Syria. For most of the past two months, the stock markets have seen the return of volatility. How should investors thread?
Making A Mountain Out Of A Molehill
In an interview with 95.8FM, market veteran Mr Goh Mou Lih explained that it will be a difficult period, especially for retail investors. Since February this year, retail investors have been spooked by the prolonged correction seen in the stock market. In addition, Trump’s belligerence on imposing tariffs to spark a global trade war, as well as escalating US-Russia tensions, further added to their woes.
Taking a step back though, Mr Goh explained that thus far, every seemingly negative news was blown out of proportion by the media. For instance, the trade war tensions were allayed when the governments of US and China announced that they will be negotiating on trade terms. While friction may still arise from differences during the negotiations, the situation is more benign than it first appeared.
On Singapore’s Economic Growth
Overall, uncertainties over international trade dynamics and tensions between the US and Syria will pose as overhangs for the stock market. But on the local economic front, signs of accelerating growth points to a more positive picture. For Singapore, projections for our gross domestic products came in within expectations, as our manufacturing industries continued to power the economy ahead. While the construction sector continues to be lackluster, there are also signs of pick up. The services industry also grew 3.8 percent.
Over in the US, latest economic data were a mixed bag but on the whole, the employment landscape remains strong. Given that these data tend to move the markets, retail investors should wait on the sidelines and monitor the trends before making any moves. This is especially so in the near-term as the recent market movements suggest that market participants tend to overreact to bad news.
Economic Slowdown Unlikely
On the whole, global stock markets still has room to run higher, especially if trade and geopolitical tensions do not run high. Neither the bear market, nor signs that indicate one, have yet to rear their ugly heads. For one, economic slowdowns tend to precede bear markets.
Since the 2008 financial crisis, the long-term growth rate has been relatively low before global economic growth finally began to see some acceleration in these two years. Given that, Mr Goh believes the chance of an economic downturn is rather unlikely and hence investors should remain cautiously bullish.
Buy And Hold Like Buffett
Last week, the Monetary Authority of Singapore (MAS) has tightened its belt to allow for modest appreciation of the Singapore Dollar but the centre of the width of the policy band would remain unchanged. The slope of the Singdollar Nominal Effective Exchange Rate was increased slightly, in face of higher core inflation.
According to Mr Goh, local investors should wait opportunities to bargain-buy, especially when the stock market goes into correction mode. Given how the recent geopolitical uncertainties caused the market to oversell, investors should enter when it occurs again. At the end of the day, as long as nothing concrete to suggest that geopolitical tensions have turned south, buy low and hold is still the best strategy.
Join Mr Goh Mou Lih at Shares Investment Conference, on 5 May 2018. Mr Goh Mou Lih is a stock market veteran with more than 20 years of experience in investment analysis and his insights are highly sought after amongst local investors!