We have entered the micro era of black swans. Where the abnormal has become the new normal. Economic and headline news is no longer the main driver of markets.
This is the new world we live in however, the public doesn’t seem to be scared. People are normalizing after their stint in lockdown and have even developed a bit more of a risk appetite in the market.
With the current activity inside markets, our expert affiliates outline a few themes worth considering before you invest your hard-earned capital.
There are rhymes and patterns as to how markets price in news. The shocking racial events plaguing Minneapolis evoking reaction all over the world hasn’t yet seen any price action within stock news. However, as the country is waiting for city centres to reopen after the Coronavirus crisis to help with the economy, events such as these are not market news, until they are… (something to keep in mind)
Markets rallied last Friday as investors were relieved after Donald Trump’s not-so-harsh announcements on the Chinese trade war. However, the anti-Chinese dialogue is likely to remain a major theme to market sentiment moving forward.
So, as those news items unfold we can expect some road bumps in the short-term, even with the smoothness and bounce back of the month of May. Expect different sectors to spike, tech and healthcare to cool off and volatility to increase.
With those expectations and themes, here is what we recommend to do when entering the stock market this month:
Take it day-by-day, don’t use your emotions and ego to look for negativity in the economy and force trades to try to anticipate large price spikes. Also, would you put your money into a mammoth tech stock at its 52 week high or into a Wells Fargo & Co (NYSE:WFC), for example, that hasn’t had a break out move yet?
Put on your fund account manager caps and take a very logical approach to your investing activities.
There are some trading opportunities to take advantage of stocks on the move because of the current circumstances the world find itself in. For example, Logitech International SA (NASDAQ:LOGI) webcams are sold out on every platform you search for. Their stock has seen a continuous rise since mid March – up more than 75%. Stay-at-home stocks and companies thriving in these unprecedented economic climate are worth looking into.
We believe in a general hedging strategy for the short-term. We like to insure ourselves against negative event’s that could impact our investments. When the markets go up, we want to make money on our long plays. When the markets go down, we want to make money on our short plays. Trading put options will allow us to either take increased profits or protects our long investments when the underlying security takes a turn in the other direction.
Watch the full interview with Wealthpress Head Trader Roger Scott, Joy of the Trade Head Trader Jeff Zananiri and Future of Wealth Head Trader Lance Ippolito to learn how they are using these strategies in today’s economic climate.