Keep your cool in the eye of the storm

Keep your cool in the eye of the storm
14 November 2012

THE big news in October was Sandy. Not only did this devastating storm steal the headlines from the US presidential election, she closed the US stock market too! Markets were closed on the last Monday and Tuesday of October, the first two-day weather-related closure since the late 1800’s.

Earlier in the month the Dow established a new 52-week high, but closed October at 13,096.46, down 2.5% for the month.

Super-storm Hurricane Sandy appears to have hurt Romney's election chances, as President Obama had 3 full days to capitalise on his role as commander-in-chief, with some 80% of the American public saying that he had handled the crisis well. By making sure he did not repeat the mistakes of George Bush following Hurricane Katrina, America saw President Obama caring for the people hit by Hurricane Sandy immediately after the devestation.

A quick, cool and steadfast reaction to disaster was certainly priceless towards his eventual campaign win which would follow one week later.

A tough battle ahead

As victor of the election, President Obama will face one of his toughest battles yet as a raft of geopolitical challenges are expected over the coming four-year term. Many economists feel that the turmoil of the past four years is likely to continue, making for a volatile era in international politics and global markets. 

Greek debt and turmoil in the Eurozone

The situation with Greece will continue to be challenging over the coming year. Whether Greece will remain with the Euro over the medium-long term depends primarily on their government’s attitude towards the implementation of their austerity measures, and also whether the Troika (the tripartite committee led by the European Commission with the European Central bank and the International Monetary Fund) is in a position to fund an effective solution to their ongoing debt issues.

If Greece were to leave the Euro, the impact on Greece itself would most likely overshadow the issues faced by the remaining Euro members, whereas a Spanish exit would likely have more of a profound effect on the Euro and the Eurozone as a whole.

Financial stocks are generally the most sensitive to the sort of economic volatility that is likely to happen as a result of a country leaving the Euro. However, as recent years have shown, it is possible to deliver good returns even during periods of crisis for the financial sector.

A multi-year investment opportunity

For example, the entire ASEAN (Association of Southeast Asian Nations) bloc offers some interesting investment opportunities, given the Association’s roadmap for an ASEAN Community (expected to be completed by 2015).

This integration is important, as it will transform ASEAN into a production base over the next few years. With the emergence of a middle class in Asia with the ability and willingness to spend, this market represents a multi-year investment opportunity. Also, urbanization and infrastructure in Asia are far from complete. The need for better roads, rail-links and airports remains and, in places like Indonesia and Thailand, governments have the budgets to fund these longer-term projects.

Top tips

In times of uncertainty, it is important not to be a gloom-monger! Here are cashy’s top 5 tips on keeping your grace in the face of doubt...

1. You may be preoccupied by the parlous state of your investments, but don’t expect everyone else to share your fixation.

2. Remember that, if you’ve got any sort of investment portfolio, you’re in a very lucky minority; so don’t moan about poor returns.

3. Haranguing other people about the non-productiveness of their investments won’t be popular: your advice maybe good, but you should only offer it when you are invited to do so.

4. If you’ve escaped the worst pitfalls of a volatile market, don’t boast about your foresight.

5. Accentuate the positive: don’t bellyache about economic uncertainties; use your money to make a difference in the world.

There’s obviously a time and a place for everything, so restrict talk of investments to a business context and don’t become a dinner party bore!

Pic credit: freedigitalphotos.net

Have you made any investments which concern you as you look to the future? How do you prepare for the worst, whilst hoping for the best? Share your investment tips and tricks with cashy below!

Comments

No comments.

If you are registered you need to log in to comment, if not, please sign up.

Author
Independent Financial Advisor
Facebook Feed
Related articles