Welcome to Year 2020!
It’s interesting to note that in 2019, the global stock market was in chaos. Many ‘experts’ predicted that the market was at the brink of collapse . Fast forward to today and the Dow Jones, S&P 500 and Nasdaq indexes have gone up by around 20% and have reached a historical high.
What opportunities await us in 2020? Let’s discuss some key indicators.
Apart from the US, the market indexes in Europe and India have neared an all-time high, indicating higher risks and valuations. Every new high is bound to have a correction. Oddly, the bull kept climbing even with so much negative news flowing in. Now, the bad news has reduced. Does it mean the market possesses higher risk? It’s worth reflecting.
When investors perceive the market as ‘dangerous’, they find a safe haven (gold) to park their funds in, leading to higher gold prices. In the second half of 2019, gold price increased substantially and stood above the 1500 psychological level for a few months. Although it is now below 1500, it has been considered high for the last five years. It means the market is somehow reserved and uncertain.
But don’t get overwhelmed. The gold price was above 1500 in 2012 and 2013, and nothing bad happened. Eventually, gold prices came down and the market moved on.
A few factors affect the US dollar, such as interest rates hike, US economy data, commodity prices and trade war development.
What matters most is that strong US dollars favour export-oriented companies like furniture makers, technology and gloves manufacturers. A weaker US dollar affects these companies’ earnings.
Potential Black Swan
Black swan events happen unexpectedly and the results often carry an extreme impact. The best way to deal with them is to manage your risk appetite.
An obvious example is the recent Hong Kong protest, which paralysed the country’s daily operation and caused recession. Luckily, this did not affect the global economy. On the other hand, the trade war, which seems to have entered a positive development, could be a potential black swan if there is an unexpected twist.
Trade War Development
The trade tension between the two largest economies may have subsided, but has not yet resolved. In fact, the trade development is a double edge sword. It can either turn into the bull or the bear and take control in 2020.
Having said that, the year end is usually a better time for the stock market. Here’s a look at our portfolio on 16 December 2019:
The portfolio shows a 295% gain since November 2015. It is not the result of buy and keep, but rather, buy, monitor and take necessary action.
In December 2019, we sold 45000 shares of RANHILL (5272) at 1.13 with a profit of nearly RM14000. We are also entitled to 1.5 cents and 0.5 cents of dividends from SCICOM and JHM, respectively, totalling dividends to RM1950.
Add NOTION (0083)
The NOTION management targets sales revenue at RM320 million in FY2020 and above RM400 million in FY2021 mainly from fabrication. With better economies of scale, the company also expects higher net margin moving forward. Seeing the strong growth prospect and improving profit margin, we bought 60000 shares of NOTION at RM0.9.
After receiving dividends, the new cash level will become RM92321.
In essence, I believe the above indicators give us an idea on how the macro economy and stock market will fare in 2020. Let’s see what it has in store for us.
Tey Bin Yuen
Binyuen is the founder of BY Enrich Resources and the author of ‘Life beyond the Comfort Zone’ and ‘Profit from Share Investment’. His books are available in major bookstores in Malaysia, Singapore or online http://www.teybinyuen.com/profitfromshareinvestment .