The market eagerly anticipates the next potential crisis as it attempts to take a pause from a period of strength seen over the past six months. While the market seems overbought, it has consistently climbed higher. Although negative news is currently absent from the market, it is crucial not to become complacent. Caution is advised as investors rush to find the next promising investment like NVDA.
Let’s examine some potential negative factors: the upcoming testimony of the FED Chairman, potential tensions arising from Biden’s comments on China, savings are drying up, credit is going up, and FED EX’s decline due to weaker-than-expected guidance. If the economy weakens and the yield curve stays inverted, a recession is likely. Technically, we have not been in a recession yet. However, these issues may not pose a significant concern if one remains focused on the long-term perspective.
There is a noticeable shift among analysts towards value stocks, given the recent events of the past two years. In line with our previous discussion on Behavioral Finance, it is important to exercise caution and avoid following the herd mentality. Conduct thorough research, maintain discipline, and seek knowledge. Ask yourself whether you would want to hold onto this investment five years from now. Our portfolios are subject to constant re-evaluation and review, with adjustments made as necessary. Additionally, it is worth noting that the 1-month Treasury rate currently exceeds 5%, indicating that there is no immediate need to rush into decisions.
While some technicians may argue that the market is overbought, the emphasis should be on investing in quality. Such investments are expected to yield positive results over the next five years. Political developments, potential trade disputes with China, the inverted yield curve, and the weakening economy will likely remain focal points for the market. It is important to maintain fiscal responsibility, which involves paying down debts, making long-term investments in quality assets, and avoiding behavioral biases.
The market, much like the weather in Chicago, is ever-changing. If you are dissatisfied with the current state, be patient, as a new crisis or opportunity will emerge soon. Investing with a long-term perspective has historically proven to be effective.
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