SINGAPORE: Stock markets have been on a rollercoaster ride this month.
First, indexes around the world fell and fell again after United States President Donald Trump announced tariffs on all goods entering the country, and heavier levies for goods from certain countries.
Then, the president said there would be a 90-day pause on the higher tariffs on all countries except China – and stocks rebounded.
Analysts told CNA that although there will be opportunities to buy, trying to pick the right time is not only difficult, but might not be the right mindset to have.
“Timing the markets is a tricky and risky exercise and (it is) especially difficult to do at this juncture given Trump’s policy unpredictability,” said Mr Vasu Menon, managing director of investment strategy at OCBC.
“Trying to outsmart markets to pick the perfect time to invest can be costly,” he added.
Once prices rise significantly from their lows, it becomes psychologically more difficult to invest and investors may then miss the boat.
It is always tempting to react to the market volatility, said Mr Hugh Chung, chief investment officer at Endowus. Some investors sell risk assets, while others avoid entering the market to wait for things to stabilise.
“It is ‘time in the markets’ that really counts, not ‘timing’ the markets,” he said.
Ms Christina Woon, a portfolio manager at Eastspring Investments Singapore, said the market is reacting to changes in rhetoric before the actual effects have had time to play out.
“Finding conclusive inflection points in shifting sands becomes increasingly difficult,” she said.
Dollar-cost averaging is a suitable strategy in the current volatility, said Mr Menon of OCBC. This is the practice of investing a fixed amount of money at regular intervals, regardless of current market conditions.
That usually involves using an investment platform to buy stocks once a month or once a quarter. He said this is the best approach because it takes emotions out of the picture.
“You reduce risk by ensuring that you have some dry powder should markets correct further,” he said.
“At the same time, you get to participate in the current markets, which may yield good gains, instead of holding cash and being a spectator who is sitting on the sidelines.”
Keeping your money as cash is not a good strategy because markets could soar if tariff fears ease and the tide turns, he said.
Another way to mitigate volatility is to own stocks that pay regular dividends, Eastspring’s Ms Woon said. The company previously wrote about the strong investment case for a dividend-focused approach to Asian equities.
“That thesis remains very much intact, if not stronger, following the US tariff announcements,” the note said, adding that many Asian companies have a domestic focus and are slightly insulated from the tariffs.
Having income from regular dividends is helpful when share prices are see-sawing.
However, not timing the market does not mean investors should ignore market movements.
They can leverage market pullbacks without attempting to time the market perfectly, said Mr Marc Franklin, deputy head of multi-asset solutions in Asia for Manulife Investment Management.
His advice was to maintain a long-term investment perspective and align with evolving market positions. That will help investors benefit from potential growth over time, he said.
Mr Franklin added that the tariffs may mean China pivots toward an economic model driven by consumption, and that can create both winners and losers.
If China chooses the path of domestic economic stimulus, the consumer sector could benefit.
“Monitoring these changes and adjusting portfolios can help capitalise on opportunities and mitigate risks from global trade realignments,” he said.
There could be some respite if negotiations go well and geopolitical tensions scale back, said Ms Woon of Eastspring. Chinese domestic policies may also be able to increase confidence in the market.
“We are at the start of a potentially long road ahead and it is tough to call when things will stabilise,” she said.
Mr Menon said Mr Trump’s decision to pause tariffs and his willingness to negotiate offers hope of a better outcome for the global economy and investment markets.
However, there will be both positive and negative outcomes during the 90-day pause, he said.
“Markets will be volatile in the short term, but intermittent corrections can offer opportunities for those with the risk appetite and patience as we are constructive on the investment outlook over a 12-month horizon,” he added.
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First, indexes around the world fell and fell again after United States President Donald Trump announced tariffs on all goods entering the country, and heavier levies for goods from certain countries.
Then, the president said there would be a 90-day pause on the higher tariffs on all countries except China – and stocks rebounded.
Analysts told CNA that although there will be opportunities to buy, trying to pick the right time is not only difficult, but might not be the right mindset to have.
“Timing the markets is a tricky and risky exercise and (it is) especially difficult to do at this juncture given Trump’s policy unpredictability,” said Mr Vasu Menon, managing director of investment strategy at OCBC.
“Trying to outsmart markets to pick the perfect time to invest can be costly,” he added.
Once prices rise significantly from their lows, it becomes psychologically more difficult to invest and investors may then miss the boat.
Related:
It is always tempting to react to the market volatility, said Mr Hugh Chung, chief investment officer at Endowus. Some investors sell risk assets, while others avoid entering the market to wait for things to stabilise.
“It is ‘time in the markets’ that really counts, not ‘timing’ the markets,” he said.
Ms Christina Woon, a portfolio manager at Eastspring Investments Singapore, said the market is reacting to changes in rhetoric before the actual effects have had time to play out.
“Finding conclusive inflection points in shifting sands becomes increasingly difficult,” she said.
A BETTER STRATEGY?
Dollar-cost averaging is a suitable strategy in the current volatility, said Mr Menon of OCBC. This is the practice of investing a fixed amount of money at regular intervals, regardless of current market conditions.
That usually involves using an investment platform to buy stocks once a month or once a quarter. He said this is the best approach because it takes emotions out of the picture.
“You reduce risk by ensuring that you have some dry powder should markets correct further,” he said.
“At the same time, you get to participate in the current markets, which may yield good gains, instead of holding cash and being a spectator who is sitting on the sidelines.”
Keeping your money as cash is not a good strategy because markets could soar if tariff fears ease and the tide turns, he said.
Another way to mitigate volatility is to own stocks that pay regular dividends, Eastspring’s Ms Woon said. The company previously wrote about the strong investment case for a dividend-focused approach to Asian equities.
“That thesis remains very much intact, if not stronger, following the US tariff announcements,” the note said, adding that many Asian companies have a domestic focus and are slightly insulated from the tariffs.
Related:
Having income from regular dividends is helpful when share prices are see-sawing.
However, not timing the market does not mean investors should ignore market movements.
They can leverage market pullbacks without attempting to time the market perfectly, said Mr Marc Franklin, deputy head of multi-asset solutions in Asia for Manulife Investment Management.
His advice was to maintain a long-term investment perspective and align with evolving market positions. That will help investors benefit from potential growth over time, he said.
Mr Franklin added that the tariffs may mean China pivots toward an economic model driven by consumption, and that can create both winners and losers.
If China chooses the path of domestic economic stimulus, the consumer sector could benefit.
“Monitoring these changes and adjusting portfolios can help capitalise on opportunities and mitigate risks from global trade realignments,” he said.
“POTENTIALLY LONG ROAD AHEAD”
There could be some respite if negotiations go well and geopolitical tensions scale back, said Ms Woon of Eastspring. Chinese domestic policies may also be able to increase confidence in the market.
“We are at the start of a potentially long road ahead and it is tough to call when things will stabilise,” she said.
Mr Menon said Mr Trump’s decision to pause tariffs and his willingness to negotiate offers hope of a better outcome for the global economy and investment markets.
However, there will be both positive and negative outcomes during the 90-day pause, he said.
“Markets will be volatile in the short term, but intermittent corrections can offer opportunities for those with the risk appetite and patience as we are constructive on the investment outlook over a 12-month horizon,” he added.
Continue reading...