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4 Ways To Navigate The Current Market
In the Spotlight | 30 May 2014
By:

Yes, we know. We are in the dreadful period, where many chant the adage of “Sell in May and Go away”.

Interestingly, we see a lot of compelling contradicting signs from the market that are giving the bears a hard time.

I mean, the S&P 500 shot through new highs, the Straits Times Index is still above 3,200, so yes, we have a contradicting theory in play now.

On 24 May, Shares Investment held a Mid Year Review conference to talk about the ways in which you could possibly navigate this period of “contradiction”.

Also in this issue:

The conference focused on strategies to take on both the bull and bear sides, and signs to prepare yourself to be wary and start planning your escape strategy.

Look At The Yields

The Treasury yields can be a first warning indicator to you that signals if a market will be overvalued and crumble.

If the yields rise too suddenly from say 1 percent to 2.5 percent or even 3 percent, do alert yourself and be in the know that within the next six months, a highly probably of a crumbling scenario on the stock exchanges is very likely.

Why is that? Simply because people can’t pay back the borrowings that they owe, which was previously borrowed at such a low rate, compared to the high rates now.

Understanding Yellen’s Choice Of Words

Yes you didn’t see it wrongly. Yellen is the new queen of the Fed’s printing machine, and her words, need to be paid extra attention to.

What word specifically? “Discussing”. That’s the key word.

It has been observed that whenever Yellen or the rest of the Federal Open Market Committee (FOMC) releases a statement, the word to pay attention to would be “discussion”.

Many times after the word discussion has been thrown out, it normally plays out in six months. Relate that to how tapering was “discussed”, and where we are now.

Own High Yield And Defensive Stocks

In order to ensure that you are still getting recurring gains regardless of the performance of the market, the best thing to have, or look at, would be high yield or defensive stocks.

Specifically, Real Estate Investment Trusts or REITs have taken a huge beating over the past months and are seemingly looking considerably attractive now.

The latter are defensive stocks, like telcos and industries that are heavily linked to the government.

As long as the yields are above 4 or 5 percent, they can be considered as candidates for your high yield plays.

Levels Of Interest For The STI

Attention will need to be paid to certain key levels of the STI during these couple of months. 2,800 will be the key support to look at.

Anything below this level, will ring significant alarm bells for the market. Key resistance however, is set at 3,450.

Judging how close we are to 3,450, if the STI can break 3,300, and within the two weeks of the break it doesn’t retrace back to 3,300, the 3,450 level will be an even better endorsement for the index to test.

Conclusion

The key takeaways of the conference doesn’t change the underlying tone that everybody struggles with. “The herd effect of a sell off”.

What the takeaways advocate however, are key tips, or techniques to perhaps make it a little more logical for you to avoid being part of that sell off herd, “unnecessarily”.

On the whole, it is touted that there are still opportunities in the market, and tactful investments should be done to take advantage of that.


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The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

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