What to expect from Stock Markets ?

Double Whammy Strike on the Economy

What to expect from Stock Markets ?

Double Whammy Strike on the Economy

What to expect from Stock Markets ??

After 2021 Liquidity Powered Bull Market amidst benign inflation, the situation now has completely transformed. If 2021 was a low interest rate period, 2022 is all set to see interest rates soar. Housing Loan is long term debt fuelled by ever changing interest rates. One has to be ready to see Housing EMIs go up. Unfortunately, the short term controls our long term outcomes in investing for those who lack the knowledge. We land up doing things we should never have but then "Dil ka kya karein?"

Double Whammy Inflation.

Demand Led Inflation : With Covid Pandemic hopefully ending, People are desperate to step out and do all the stuff they were deprived of during Pandemic. This includes Restaurants, Holidays, Shopping and so on. This will cause Demand led Inflation.

Supply Led Inflation : The Russia Ukraine war is hurting India on account of supply of crude oil. So India’s import bill will go up. This will cause Rupee to depreciate. A weak rupee unlocks the door for Inflation to step in.

There’s no doubt that Interest Rates will have to Rise. On the back of a Liquidity induced Bull Market in 2021, the current environment has already broken the back of the Bull and has tamed it. Expect Markets to show bearish character and remain volatile and range bound.

The irony of investing is that it never allows you the privilege of Performance Evaluation because of the cyclical nature of markets. So if performance has been well, the probability of poor performance is higher than good performance. Likewise the best opportunity to invest is in a bad performing environment. A time when the overall sentiment is at its lowest. When the mood is bad, you are expected to invest and truly doing that is no mean feat. Very few have the strength of mind to invest at the best time.

Our emotions are a lot more stronger than what we think. The head may say ‘this is the time to invest’ but the kambakt heart comes in the way.

The heart says, ‘I am afraid. Nothing around looks nice. I need my money close to my pocket.’

This is one big reason, why one has to keep a substantial share of investment in Asset Allocator Funds. These funds always have cash available to invest when the time is ripe. Our personal emotions fortunately do not influence the deployment of the fund manager once we are invested in the category. This is certainly is a great opportunity for wealth creation because the ground is most fertile and investment friendly even the though the air above the ground is smelling of gun powder. This is a time when you can expect to earn perhaps even good short term returns & certainly medium term returns. And this is the time to also remember that there is little joy in seeing your investment go up and again come down to same old levels. Instead regular profit booking helps not only in wealth creation but also helps in preventing draw downs during subsequent falls and this again adds fuel to produce better returns. Asset Allocation with negative correlation between asset classes is a protection tool. However it is Asset Rebalancing that creates the ground for Wealth Creation.

The best time to invest is here and now. Time to take a deep breath, pause the Fear & for God’s sake do the right thing.

Disclaimer : This Article is only for information Purpose and should not be treated as Financial Advice.