The bottom of the market MAY have been reached, and indications of an end to the war from President Trump have bumped it off the bottom. But what can we know with confidence?
- TACO Trump speaks out both sides of his mouth
- Inflation is rising leading to interest rate pressure leading to economic slowdown
- Fuel shortages are likely and an economic headwind
So, what is the investor to do?
Firstly, one must have faith that the market will always recover. Trump is expected to be somewhat impotent come the November elections, without the cover of a Republican house and possibly senate. This will provide a period of calm before the optimism that a Democrat will take over from the start of 2029 and start to reverse the damage.
So, on the underlying basis that the market will return to robust health eventually, and that nobody can ever time the market reliably, the most obvious thing is to sit tight – do not sell. The war could end soon, then the market takes off, and you have cemented in a loss.
If the market does fall further, then that is an excellent buying opportunity.
But right now? We follow the Buffet principle: “Be fearful when others are greedy, and be greedy when others are fearful“. There is still pessimission in the market, and prices remain depressed, providing an opportunity to pick up under-valued quality stocks that have fallen proportionally more.
To give an example, not a recommendation, Microsoft has fallen 21% this year, and is at the price it was in December 2023. Revenue and profit however have continued to grow. The latest quarterly figures are all significantly impressive. Concerns about AI investments are spoken about as the reason for the price fall, so it’s not a no-brainer to go buy it, but with actual current earnings bouyant, it may have some great upside when the market recovers.
Back to the overall market, this is the SP500 year to date.
The US market is down 4% this calendar year, but almost 6% from the February all time high. The MSCI world index is down slightly more from the peak, indicating global contagion, unlike in 2025 when many work markets soared while the US market sauntered.
Bottom line, we are using the cash we stashed last year and easing it into the market each month while it is deflated. It may go down further, in which case we keep buying. It may recover fully quickly if the war were to abruptly end, and then we accumulate some more cash over time to wait for the next, inevitable dip. With an erratic president, there will be more!