Treacherous
Pfäffikon SZ, Switzerland – September and October are historically difficult months on the global markets. However, investors still seem little impressed by the increased volatility. Stretchy indicators such as consumer confidence are embraced, and hard economic facts, meanwhile, are ignored. The current financial environment is unfamiliar and treacherous.
Struggling
Many investors struggle with the difficult investment climate. To place historically low-interest rates in perspective is difficult. There is a lot of money available at extremely low fees, which resulted in an uncharted territory for most investors. Companies are trying to use their (too) heavily increased share price at acquisitions and overload themselves at the same time with a lot of debt. However, in my view, the time has come to leave the dance floor.
Bubbles
The current situation is sometimes described as the ‘everything bubble.’ So-called ‘buy-outs’ have no meaning anymore because of the too sharp increased share prices. But real estate prices has also risen too much; not to speak of the fixed income part of an investment portfolio. Many indicators look healthy but are fragile. Many investors have a hot rod in hands.
For now, investors got through the month of September unscathed. The problem with bubbles is that so-called gurus only afterward can accurately indicate why there was a bubble. In 2000 and 2008 this was the case time after time. No one can tell you when bubbles burst; a possible burst always comes at a time when almost no one expects it. Today’s market, however, feels just as uncomfortable and insidious as 2000 and 2008, even though no one wants to hear this. Many historical materials endorse this picture.
The time has come to leave the dance floor. On balance, this is a period to sell more than to buy. Investors would do well to adopt a more humble attitude for a longer term due to the given market conditions.
It remains for me to wish you a good weekend.
Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in the above mentioned shares and has no intention of doing so in the next 72 hours.
