This is what I have gathered from Mr Lim Say Boon, Chief Investment Officer of DBS Wealth Management’s 8 predictions for the 2nd half 2016 market outlook:
- Brexit will not break EU but will break European stocks
- Global economy will continue to suffer and corporate recession continues to spread
- Us stocks will be about 10% lower in 6 months
- Bank of Japan will unleash another monetary bomb that will weaken yen and strengthening equity
- China will continue to ease (cautiously) boosting H shares
- Asia ex-japan income stocks will outperform global equities
- Dollar will have a last hurrah and following that, gold will rise late end of the year
- Bonds as expensive as they are will continue to outperform equities
Additional points from Mr. Piyush Gupta, DBS CEO, Ms. Irene Goh, Aberdeen Head of Multi Assets and Mr. Gregor Carle, Blackrock Head of Asia Pacific Fixed Income Product:
- Be calm among the volatility in the market
- Buy UK companies that have earnings majority not in the UK because during consolidation, earnings will increase at least 15%
- GDP might be the wrong stuff to measure. The right stuff is economic satisfaction, nowadays we can get same economic satisfaction with lower GDP (lower output)
- Asia is the growth engine of the world and 42% of Asian credit is corporate credit
- Corporations need to make contributions to the society based on the rise of populism and because of that, there might be potential lower rate of returns
Additional Learning Point-> Taylor Rule Model
In economics, a Taylor rule is a rule that is used to forecast interest rates. It is created by an economist named John Taylor back in 1992.
According to the rule, the Federal Reserve should increase interest rate when inflation is above target or when GDP growth is too high and vice versa.
Image source: Investopedia
Above is the formula for Taylor Rule.
It essentially says that the difference between the nominal and real interest rate is the inflation. Real interest rate accounts for inflation and nominal interest rate do not. So if the inflation is 6% and the nominal interest rate is 9%, the real interest rate is only 3%.
Disclaimer: The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.
Important: Please read my full disclaimer.
CHRIS LEE SUSANTO
Hi, my name is Chris and I am the founder of Re-ThinkWealth. A blog that focuses on personal finance self-improvement, investments, and investor psychology.
Since early 2015, I manage money for my family and invests it in Singapore and United States equities and options achieving above market return.
I use Value Investing and Options Selling strategies used by Warren Buffett (World’s richest investor) coupled with the core theory of inversion. Inversion meaning that in every investing idea, we have to scrutinise on why it would fail.
This will result in us being more conservative, and being conservative is the key to protecting and growing wealth in the long run.
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