Has Market Bottomed?

JC Project Freedom Market Cycle

I have been thinking about this question whether the market has bottomed? Looking at the market cycle image, I am just wondering whether we are at the “Complacency” stage where we just need to cool off for the next rally or this is a “Hope” stage where we believe a recovery is possible.

Some of us believe that the stock market will plunge again if the COVID-19 virus persists. Sooner or later, all companies will report deteriorating quarterly earnings reports. The actual earnings could shock the market and send investors selling in panic.

Some believe that the stock market’s worst fears are all factored in the share prices already. All the bad news such as the mass business bankruptcies, an increase in unemployment rates and global recessions. All these negative news have already been factored into the market prices. Any good news will send the share prices higher.

The rebound was driven by improving statistics on the slowing number of new cases in the United States and Italy, giving hopes that the worst is over. Investors were reassured by governments and central banks that they are willing to protect the financial markets. There is more hot money in the market to do more asset purchases.

We should look beyond the short term, meaning the next 1-2 years and use historical earnings as a basis to evaluate our investment. The COVID-19 virus has disrupted the normal way business is run and it has changed the behaviour of people. We are turning to e-commerce, purchasing food and groceries online, digital payments, virtual banking and remote working. We need to ask whether the business we are invested will remain relevant.

Personal Update

Recently, I read Christopher Tan’s Money Wisdom and Goh Yang Chye’s Simply Invest. These two books are shaping the way I will like to invest in the future.

I will deploy SGD to purchase STI ETF such as ES3.SI, HKD from dividends will be deployed to purchase CSOP A50 ETF, USD from dividends will be deployed to purchase MSCI ACWI. I will help my wife to add SGD 15,300 this year to her SRS and continue to purchase more Dimensional Fund Advisors equity funds through Moneyowl. The deployment into ETFs and DFA funds will be spaced out which will be executed on a monthly basis.

The last sell put 17th April 2020 5 RDS.B @ USD 40 was assigned. I have 5,000 shares of RDS.B with an average price of USD 44.50/=. I need to follow every quarterly report for this company. Assume the dividend is not cut, this will be a 8.45% yield stock for my portfolio.

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