The Feds released the minutes of their December meeting 2 days ago. It was more hawkish than expected, with ultra-easy conditions slated to end faster. Markets have reacted negatively to it, but are still very close to all-time highs.
This is going to be a long-term drag on market sentiment. The balance of market forces have changed. With policy now acting against the market, coupled with sky-high valuations, the probability that the red-hot market rally will end is now high than ever.
In my humble opinion, it is best to minimize exposure to stocks which have run up a lot, and also stocks with high gearing ratios. If you have high conviction that a stock will fall, you can also consider shorting it.
The CNBC Market Strategist Survey gave a snapshot of the predictions for S&P in 2022. In summary, the targets range from 4400 to 5330, with an average target of 4985 and median target of 5050. Given that S&P closed at 4793.54 yesterday, there is roughly upside of 4-5% according to the biggest banks in Wall Street.
Interestingly, the predictions for 2021 were included, and ranged from 3950 to 4800. This means that almost everyone got it wrong for 2021. This serves as a reminder that these price targets are really “best guesses”.
Nonetheless, the 2022 predictions indicate that the “experts” do not think that the returns of the best part of the last 2 years will most likely not be replicated. In my humble opinion, it would be prudent to rotate into other markets for better returns. Cheers!
US markets performed strongly last night, with S&P ending at a new record. Perhaps Santa Rally has arrived. What a year it has been for US stocks. Looking at S&P, which arguably has the greatest influence on global markets, it has been on a tear since March lows. It currently sits at 4725.79, which is more than double of the 23 March 2020 low of 2184.88.
The fundamental driver is that Omicron appears to be mild and therefore less harmful to the economy. While this may be true, we need to remember that valuations remain sky-high and we are at the start of the withdrawal of extraordinary stimulus measures by most central banks. It is probably not the best time to enter massive long trades.
US markets are the most influential markets in the world, so any correction there will affect other markets as well. There is also the risk of inflation as well, so please be selective of your trades/investments. Good luck!
I was a data analytics specialist in Singapore who got to know about the markets in 2010. In Dec 2021, I retired early from the corporate world by trading the markets, having accumulated enough trading profits. Below chronicles the steps I took in my trading journey.
I started off as a buy-and-hold investor, and bought only Singapore stocks via traditional brokerages. Profits were modest during these initial years.
I ingested mainstream investing guides and analyst reports, hoping to become an investment guru. However, I sadly remained a noob at the end of this phase.
Exploring Trading Possibilities (2012 – 2013)
Heading into unchartered waters
I opened various CFD accounts to explore the trading universe. CFD platforms offered a wide range of markets and asset classes, and facilitated different trading styles. It was like Star Trek – CFD platforms opened up strange and wondrous new worlds to explore. I tried trading different markets, industries, asset classes and trading styles. It was a time of intensive experimentation and inconsistent performance.
Awakening (2014)
The moment of realization
I finally found a combination of trading strategy, trading instrument, asset class and market sector that worked for me. Collectively, I shall term it my trading framework. As I started to refine it, consistency improved and for the 1st time, I managed to earn a 6-figure sum from trading over a year .
It felt amazing, and I thought to myself, “Wow, it really is possible for trading to change my life!” I felt hope and excitement, but also recognized that I still needed to continue to improve.
Scaling Up (2015)
Increasing position sizing
I worked on scaling up my trading position sizing to reap full benefits from my trading framework, and forced myself to endure the increased discomfort that every rise in position sizing brought. The process was akin to punching myself a little harder everyday to get used to higher levels of pain, and wondering why I was doing this to myself.
It was a painful process, but it was necessary in order to be able to generate enough profits to retire early via trading.
Implementing Trading Framework (2016 – 2019)
Carrying out the plan
With the scaling up process finished, I completed the development of my trading framework. Position sizing is an important part of the trading strategy aspect of the framework.
I used the framework from 2016 to 2019 without major changes to it. Up till 2018, it proved to be reliable most of the time. I was coasting along, thinking I could continue to depend on it to retire early by trading. But it stopped working in 2019. Market behavior had unexpectedly changed and rendered it useless.
Upgrading Trading Framework (2020)
Making changes to improve performance
I reviewed my trading framework and made changes to it adapt to the changed market behavior. The upgrade was finalized in 2020. It was more difficult to implement than its predecessor. I had to be more aggressive and take more risks, while being nimbler and more adaptive to changes in market conditions. But it started working again, so that was all that mattered.
Retiring From the Corporate World (2021)
Being my own boss
I decided to retire early from the corporate world in Dec 2021, having accumulated enough profits to feel comfortable living without a stable monthly income. Looking forward to spending more time with my family, continuing trading and pursuing other interests!
The most important lessons/reminders I gathered from my journey are as follows:
Be prepared to adapt your trading strategy to changing market behavior
Persevere on any idea that you have calculated to have a good chance of success
Avoid blindly following other trading strategies and principles, instead adapt them to your own personality and cognitive strengths
Do not be afraid to try out your own entirely original trading strategies
There is no such thing as absolute slam dunk certainty in markets
Stay humble even if you are successful, as it helps you keep true to your real self
Continue to spend time with family and friends, because they are more important than trading profits
Invest continually in your health to avoid disruptive and disabling health issues
Conclusion
It has taken 2 years of investing + 9 years of trading to earn enough profits to retire from the corporate world. I had a full-time job during these years, so it was tiring at times. I did not have a mentor, and I pretty much developed my own framework from scratch, so I probably took longer than some others to arrive at this stage. But one advantage of not rushing through the journey is that I had enough time solidify my foundation at each stage.
I hope that this sharing can help at least some of you in your own investment/trading journey. Please feel free to share your views or queries on this, I will be glad to hear from you.
