It’s 3 days till Halloween! Trick or treat?! I think we’re all sat here begging for some tasty treats. We’ll take anything because this year’s been far too tricky. And in the run-up to Halloween, world events have somehow managed to come together in some scary and spooky (almost co-ordinated) effort to join in the annual freaky festivities.
For starters, the UK – my tiny little island – kicked off the Halloween season with a real political treat. Sorry, trick. Our PM, good old BoJo, got the boot along with his chancellor Rishi. So, we had some party shuffling and found ourselves with Liz Truss. She picked her dear friend, Kwasi, as chancellor and the duo got straight down to business. Until their mini-budget nearly caused a full-blown pension crisis. Gilts got spooked, so they spiked.
Markets hated her (or her budget). So she sacked Kwasi but realised markets weren’t having it so she sacked herself. Now Rishi’s back only now he’s got the top job! The one BoJo tried to get back. Markets are calmer and gilts’ yields have stabilised.
So, British politics clearly took the prize this year but looking further afield, China’s in deep trouble. I think I’m down 35% on my Chinese holdings this year. No wonder only ~2% of the UK’s retail investor population invests in the region! Xi decided he wanted to run for a third term and so he did. And he’ll be staying for as long as he likes. Beefing up his party with all his mates.
China’s not exactly crushin’ it
But what really got investors spooked was the fact that Xi will be targeting the property and tech sector in what will be yet more regulation. UGH. No surprise then that after this news outbreak, the Hang Seng Tech Index collapsed 7% while HK-listed Chinese developers fell 9%. Yowch. What’s really interesting is that China’s GDP (a measure of a country’s economic growth) rose 3.9% in Q3 of 2022 but that wasn’t enough of a treat for investors and Chinese-focused funds sold of pretty badly. To put the damage in perspective, Alibaba is now trading ~30% below its IPO price!
And if you think all that isn’t enough, Uncle Sam’s war on Chinese semi-conductors continues. Now, before an American company can buy a Chinese one, it has to get this approved by the US! That has never happened before (other than with military tech obvs). And if that doesn’t sound like bad news, American citizens who work in China semiconducting are now faced with the choice of quitting their jobs or losing their citizenship. I think they have like over a week to decide. Geopolitics is heating up right in time for Halloween!
The tech (earnings) show is shaping up to be a disaster
Don’t think the US is outa the woods. No way. It’s earnings season folks and it’s also the run-up to Halloween so expect tricking rather than treating. And Meta was our first big trick. It lost 25% of its market cap yesterday thanks to the firm bleeding cash when its profits aren’t exactly swooshing in. I bet Zuck wanted to curl up in a ball in his money-draining metaverse after he personally lost a casual $80bn!! Moving onto Amazon who joined the club, reporting after rubbish sales and poor profits in the cloud. So they too slumped by around ~20% after hours. Though when markets opened today they were *only* down 10%. Almost $1trn has so been wiped out from big (now small?) tech. Massive numbers. Hard to get your head around it.
And if all this isn’t enough, the war in Ukraine is still dragging on and uncertainty grows with each passing day. Inflation is still very much lingering around. And listening to Putin’s speech on the strength of the dollar makes you want to rethink everything you know about our current monetary system. The one in which the dollar is king. And btw, the US is down to 25 days’ worth of diesel supply. Yeah, yikes. You can say that again. Meanwhile, mortgage rates surpassed 7% in the US and here in the UK they aren’t too far behind. What a mess.
We’re all holding our breath. Hoping markets (and countries!) don’t spring any more surprises on us. I think we’ve had enough tricking to last us a lifetime. And then some. But don’t get so spooked by stock markets. If you do, that’ll mean they’d have won! And stolen your treats! Who knows, it could be nothing more than a Halloween prank.
Markets are super short-term and right now they’ve got loads to deal with. But that’s the power of bear markets. The fear can really get to us. The bad stuff keeps rolling in and it’s near-to impossible to see the light at the end of this dark tunnel. You’ve just gotta remember to turn on the lights and turn off the news!
Markets will recover. There’s no doubt about that. Sure, they’re shedding a lot of weight right now (thanks to tech doing the heavy lifting) but a bottom will be reached. Eventually. Then you’ll look back and say ‘I wish I’d have invested more’. Easier said than done guys. Most will back away. Few will run straight to it.
Find your (future) treats. Then tuck in.
If you invest a consistent amount each month, stretching many years (if not decades), you’ll be rewarded at the end of it. Hopefully. Just like the kids get super greedy when it comes to treats on Halloween, hounding you for more jellies, lollies and other such sugary stuff, go and be greedy with your future. Make sure that you’re investing what you can so that you get to have the life you want.
In bear markets, that’s when worlds of wealth can be built but when we’re in the thick of it, we think it’s all coming to an end. Of course, looking back, you’d have wished you only had the guts to invest more. Take March 2020 as a prime example. Look at markets’ rebound. But fear is real. And it’s a paralysis-inducing drug.
At best, it stops us in our tracks. At worst, it causes us to sell out. Only to start buying when markets go up again! But that’s no way to do it.
Compounding is on your side. In the end, markets chug higher. They’re pretty resilient things. But when there’s so much uncertainty and so many things hanging in the balance, it can be hard to invest. Most people click sell and they ditch their entire plan.
Don’t do that. Hang in there and do your best not to get spooked.
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.
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