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When in doubt, stagger?

Updated: Dec 17, 2021


With many markets showing strong performances for the last year, the question on many peoples lips is “What next”?


1. Has the market gone up too much already, is there any juice left?

2. Is inflation transitory or semi-permanent?

3. If the Fed et al raise interest rates, what will be the impact on the market?

4. Is there going to be a case of the Temper Tantrum Part Deux?

5. What about Wave 3 and the Delta variant?

6. Etcetera, etcetera, etcetera…


This time last year, investors had a different set of questions, and the year before that and so on. There are always reasons to be hesitant about the economy and the market.

Should the latter correct or enter a bear phase, from out of the woodwork, come the “I told you so’s”, who justify their caution.


So what tenets do we have to counter our uncertainties and any short term corrections or bear markets. And when will it come? While, we reserve the right to be wrong, below are some thoughts.


1. There will always be corrections and bear markets. It may happen today, this week or even in a few months. No one can predict this, but pandemics and variants withstanding, the Indian economy still appears intact and as per the IMF is expected to grow 6-7% in the medium term.


2. Yes, the market has come up a lot, from a very fearful and uncertain time last year as well as thanks to Uncle Sam’s infusion of cash dollars. However, while some stocks maybe at lifetime highs and trading at some pretty fancy multiples, many of ours for instance are still below their 2017 highs, with PE multiples ranging between 6 and 10 and some are even below their book values. We believe that there is still value out there, if one takes the time to look and sort out the wheat from the chaff.


3. However, my key point here really, is that yes that some of the above concerns may cause some volatility in the market. But that doesn’t mean we sit on the side lines. There will always be doubts. One of our key tools is the ability to stagger our investments and to average into the market.


a. For those that were gutsy and disciplined to do so over the last year or two, have generally been beneficiaries of this. Averaging both their time in the market and their losses/gains. Continually allowing their money to work.


b. While the market may turn on a dime, the ability to have the next investment lined up will counter this and is your weapon to curtail and even benefit from any downside volatility.


So much like the Grand Old Duke of York, we believe that we are neither up nor down and there is much to remain hopeful about.


LEGAL INFORMATION AND DISCLOSURES

This article expresses the views of the author as of the date indicated and such views are subject to change without notice. The author and First Water has no duty or obligation to update the information contained herein. Further, the author makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.

This article is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services. Certain information contained herein is based on or derived from information provided by independent third-party sources. The author believes that the sources from which such information has been obtained are reliable; however, he cannot guarantee the accuracy of any of the information provided above and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Use information provided above at your own risk.

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