I am not one of those guys who were warning you of a stock market crash for the past few years. They totally missed the bull run we had an opportunity to enjoy since the second part of 2016. But some of them will still claim they successfully called the crash! While in fact I was very bullish US stocks until early October this year when I gave a warning something has changed. A warning about emerging markets was given out even earlier.
I am not joining the doom and gloom camp, I am just trying to be rational and am giving a cautionary heads up, because the risks and stakes are getting bigger by the day. This does not mean the market can’t continue going higher over time if the underlying fundamentals and flow improve. But should they not we’re facing a serious market crash risk.
I am one of those who rather takes some of the risk off when events are not in favor and potentially misses a few per cent of the upside than risks additional losses of your capital. With a wise portfolio management it’s much easier to catch up with those few per cent when things improve than it is trying to get back to break even and trying to fix the damage that’s been done.
I’ve written a lot warnings recently and I would invite you to read them again to get more insight what might be happening now
- Winter coming?,
- Rotation to gold and miners?,
- Sectors on the watch to short,
- The moment of truth for FAANNG stocks,
- Stock market update,
- Shorting German auto industry,
- Keeping a perspective and
- From yield curve inversion to bond squeeze?
So let me not go into too much details again, but I would still like to present you a very important chart in my opinion. In Keeping a perspective post I was writing how the US stock market already started a secular bull trend in 2013. The same is true for German DAX while this is not true for many other stock markets.
One example is the European Dow or Euro Stoxx 50 index, a more broad index compared to DAX 30. It never broke out of a consolidation that started in 2000. It’s still contained in a range.
It looks it’s starting to resolve lower. This is a major event and it could have big implications for all stock markets.
It’s the month of December now. It should be happy with full of nice moments spent with your family and close friends, so I am not sure the big guys will let December become a bloody one in the markets. But once again, it might be wise to consider the risk, wishing you’d be in and spending quality time with your family rather than wishing you’d be out, consequently spending time on screens and not having a chance to be with your closest.