It’s no brainer that bear sets the foundation for the next bull. As the stock market moves in cycles whereby after a bull run, a bear market will follow suit but subsequent to that the bull will return to propel the market to another high due to increased corporate earnings. Based on past track records of the KLCI, in every three years there is a possible occurrence of a year of poor performance. With the exception of a severe recession otherwise the bear market will not last more than 12 months. With the strong growth momentum of the US economy and moderate growth of the Malaysian economy of circa 5% growth, how do you think 2015 will fare for KLSE? Refer to data below:
Every year there are challenges facing anystock market. The initial uptrend of KLSE last year ended abruptly after crude oil prices plunged in the final quarter of 2014. As a result, fear set in and investors turned fearful thinking of the worst.
The Malaysian government may need to temporarily tighten its belt due to expected lower oil revenue this year. Such a setback is not uncommon. Most corporations will also face difficult periods from time to time but they will eventually overcome it and grow stronger than before. This is just nature of any business.
Although the recent decline in stock market was very steep, the overall fundamentals remain sound due to the strong US economic growth and lower crude oil price which is a blessing to many economies in terms of lower import bills, lower inflation, higher global economic growth and higher consumer spending power.
Over a long period of time, taking data from the bellwether of global economy – United States, the stock market will yield positive returns, while having an asset allocation portfolio of stocks+bonds will “smooth” things out. However, in short term, concentrated portfolio in equity will swing your portfolio by as much as -37% within a year.
Adapted from Phillip Capital Management S/B, from the desk of CIO 14 Jan 2015.
Comment – stock market fluctuations are actually not too worrisome because while in short term it is unpredictable, over long term, it is more predictable. There are things to be of more concern, depending on which profession you are in – source from Focus Malaysia 16 Jan 2015