sackofspuds wrote:Excellent article in the Telegraph today by Tom Stevenson, an investment director at Fidelity International, who writes a regular column (views his own):
https://www.telegraph.co.uk/business/20 ... coming-do/The market crash is coming – here’s what to do about it
Here are four investment tips to help you weather the oncoming sharp correction in global marketsHe says to sell some shares now and hold more cash.
He says every fund manager he knows is doing this
in so far as their investment mandates allow (my bold).
I think one of the first questions to ask ourselves as investors might be -
'
What level of future correction would it require for you to take meaningful portfolio-level action now, if you knew it was on the imminent horizon?'
I mention this because the linked Telegraph article is largely based on the following premise -
Of course, there’s an equally important question before you even get there, which is whether a correction really is round the corner. The short answer to that is that neither I nor anyone else knows. But the odds are clearly shorter than they were.
The list of things to worry about has got considerably longer since the spring – inflation, broken supply chains, rising energy costs, an imminent turn in the interest rate cycle, high-ish valuations, stretched profit margins, slowing earnings growth. I could go on.
Even if it is not imminent, a correction will happen at some point. If you look at the performance of the S&P 500 in the three years following each of the major bear market bottoms over the past 60 years, there has been a pull-back of at least 10pc at least once.
We are now a year and half on from the Covid bottom and we are yet to experience that double-digit decline. Given the 5pc or so retreat in September, it is not unreasonable to wonder whether the inevitable correction is under way.So he seems to have written an article regarding 'correction action plans' based on a belief that we're due one of the regular
10% pull-backs, and by-the-way, we might already be part of the way into it if one's actually happening right now...
Having read it then, I'm really not sure the 'action plans' suggested are even
justified when viewed against his actual '
10% market correction' expectations, and given that the market-worries that he's listed is likely to be somewhat baked in at this point anyway, I'd actually begin to wonder if it wouldn't take too many of those issues being mitigated somewhat to not pose as big an overall issue as he's trying to make out...
With that said, and to add a personal aspect into the discussion, I am actually in one of my fairly regular 'risk-off' modes at the current time, which allows incoming dividends and regular savings from wages to accumulate for a period, with a view to taking a bit of a breather from my usual position of regular drum-beat investment and re-investment. I don't tend to be a seller of open positions, and much prefer to simply mitigate how I feel about the current situation using accumulating cash, and over a number of months that can lead to a fairly meaningful amount.
I'll probably keep things that way until early next year with an eye on the 2022 ISA period, and this is a 'risk-off' cash-accumulation process that I've carried out a number of times over the years and which plays a large part in my 'sleep-at-night' requirements whilst I'm still working.
Getting back to the article itself - as it seems to be based on a 'correction level' of just 10%, then that's nothing like the type of 'correction' that I'd be willing to make wholesale portfolio-level sales in anticipation of, and I personally think that a correction of 10% is just about within the 'market noise' territory which we need to get used to as personal investors, and harden ourselves
against thinking we've got to actually 'take action' to cope with...
Cheers,
Itsallaguess