It is a challenge to pick what to invest in 2008 especially after the bull run over the years. 2007 have been slow for developed economies and volatile for the emerging ones. I like to share how I feel for 2008.
Slow US consumer demand.
Consumer spending accounts for 72% of US GDP. The Inflation, high oil prices, housing slump adds negative psychological factors into the consumers mind.
Rising Oil and Commodities Prices
Possible cold winter in the short term may raise oil prices beyond $110/barrel. Tension in Middle East especially from Iran may not help.Other rising commodities price such as corn, wheat, soy beans, steel also help slow down growth.
Sub Prime Issue
Some borrowers may take advantage of the problem and default payment despite having the capability. The sky is still very gloomy. Financial Institutions are expected to write off more money and unwilling to lend money to each other. Insufficent credit in the market is likely to hurt the economy.
Asia Market Decoupling from US
US consumer’s spending is over 7 times more than China and India combined. Although the growth in emerging economies are 3 times more than developed nations, they are generally still dependent on the US growth to sustain current rate of growth.Decoupling is not expected to happen in the next few years.
Personal Comments
1) Market will continue to be volatile. There are more likely bad news than good. Every bad news will shake the market for a while. Only when markets are sick of all the bad news, good and unexpected news will have the capability to rocket stock prices again.
2) Recession in US is possible, but I feel that as long as the US do not go into recession for more than 2 quarters, the growth in emerging economies will continue to post strong growth in the region of 6% to 8%.
3) Rising Oil prices raise liquidity in certain part of the world especially to Oil Surplus countries such as the Middle East and even Malaysia. These are the countries you may consider investing.
4) Defensive stocks may do well. Bonds, money market or even Primary Commodities may do just fine in 2008. Look out for undervalued economies such as Korea, Thailand and even Singapore.
5) Continue to invest. But don’t put everything you have all at the same time. Invest a smaller amount on a monthly basis for Dollar Cost Averaging effect.
1 comment:
It is good to feed the customers with info but many cannot digest. Worse is some get stomach upset and misinterpret the info, this is where you have a hard problem. They get jittery , overreact and frighten themselves of things most of the times imaginary.
Example: not many people understand about the subprime saga despite in the news for so long.You get 10 people with 10 interpretations. Even the insurance salesmen themselves, they have not much understanding.At the end of the day you have idiots(insurance agents) advising the idiots(customers), though a sale is made.
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