Is a recovery in sight?
Investors need to brace themselves for a bumpy ride, not just in September but possibly in the coming months as central banks and governments reduce policy stimulus gradually. Investors are also nervous because global equities have almost doubled in value since bottoming in March last year.
In the recent FOMC meeting, Fed Chair Jerome Powell shed light on a taper timeline to reduce its monthly bond purchases in November and end in mid-2022. However, the exact timing to begin tapering remains only tentative. Powell also emphasised that tapering does not equate to tightening, suggesting that rate hike will still be some time away. This is a positive note for investors and we see more upside in the medium term.
What does this mean for investors?
Clearly markets are facing some significant economic and political headwinds in the coming weeks, which could weigh on stock prices in the short term. Concerns about the lack of a meaningful market pullback this year, the upheaval in China, inflation and monetary policy, US fiscal policy and the debt ceiling, and the delta variant and its impact on growth and supply chains –means greater market volatility in the coming weeks.
After the strong stock market rally in the past 18 months, valuations have become less attractive, but they are not yet excessive and there is still a lot of liquidity on the side-lines. So, don’t lose sight of the fact that intermittent market pullbacks are normal after a strong rally and that this is a correction and not a bear market.
In fact, pullbacks can offer buying opportunities for those with a good risk appetite, although investors need to tread carefully, buy selectively and buy gradually if they are keen to invest on pullbacks for the medium to long term.
Investors who wish to accumulate blue-chip stocks in the Dow Jones Industrial Average may consider the Dogs of the Dow Portfolio, which invests in the 10 highest dividend-yielding blue-chip stocks in the Dow Jones Industrial Average – one of the oldest and widely followed stock indices. Investment in this portfolio provides potential capital appreciation in addition to high dividend yield. Stocks in the portfolio are actively monitored and regularly rebalanced.
Investors who prefer diversifying their portfolios into different geographical regions and sectors to broaden their exposure may consider the Growth Portfolio, which aims to deliver long-term capital gains for investors primarily through significant investments in equities. For diversification purposes, the portfolio has some allocation into bonds and gold as well. Given the substantial exposure to stocks, the portfolio is expected to be more volatile versus other portfolios with comparatively less allocation into equities.
Investors who prefer a lower risk mandate may also consider the Balanced Portfolio, which balances the need between capital gains and downside-risk mitigation.
About OCBC RoboInvest
OCBC RoboInvest is an all-in-one digital platform that helps you invest easily at your own convenience. Smart portfolio rebalancing updates also mean you save time on performance tracking and get alerted on rebalancing opportunities as the market changes, which can be especially useful in navigating rocky markets.
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