Are we into bull markets?
In continuation with my July’s blog on trade wars and its impact, where I had mentioned that due to currency valuations, trade wars, oil import bans, interest rate changes etc the markets are volatile and may continue to stay like this for some time in near future. We are now experiencing the same thing in equity and debt markets.
In the last few weeks, you would have noticed the news about the stock market falling on an average 1-2% almost every week. If you see the below table from Apr’16 till date Sensex returns were pretty decent, while you check for last few months in isolation it is -ve 5%.
| Month | Sensex | Cumulative Returns | MoM returns |
| Apr-16 | 25,607 | ||
| Apr-17 | 29,918 | 17% | |
| Apr-18 | 35,160 | 37% | |
| Apr-19 | 39,032 | 52% | |
| May-19 | 39,714 | 55% | 2% |
| Jun-19 | 39,395 | 54% | -1% |
| Jul-19 | 37,481 | 46% | -5% |
| Aug-19 | 36,492 | 43% | -3% |
If we look at the Sensex movement in isolation with a view of the last few months i.e, from Apr’19 till Aug’19 there had been around 5% downward correction. Do these movements worry you? Are you receiving a lot of information on entering a slow down and global recession?
If you are one of those who are getting into panic mode or a sort of restlessness with these frequent fall in markets, do read the rest of the article.
This question always haunts us!! “Are we heading for a bear market or a 2008 repeat?” Probably yes it is a slowdown, probably it is just temporary, for some probably it is still not slow down but the market is correcting due to some stressed sectors.
To be very frank, no one including stalwarts like Warren Buffett can predict any meltdowns/bull phases. Once in every few years, these bull and bear cycles come into force and that is the nature of equity markets. In the long run, what matters is only the time spent by you and the consistency with which you continue investing.
So, what do we do when we receive the gloomy & scary outlook of the economy? How do we handle our investments?
Before knowing how to handle investments in such situations, do go through this below data :
| Sensex Closing | |||||
| Month | 2015-16 | 2016-17 | 2017-18 | 2018-19 | 2019-20 |
| Apr | 27,011 | 25,607 | 29,918 | 35,160 | 39,032 |
| May | 27,828 | 26,668 | 31,146 | 35,322 | 39,714 |
| Jun | 27,781 | 27,000 | 30,922 | 35,423 | 39,395 |
| Jul | 28,115 | 28,052 | 32,515 | 37,607 | 37,481 |
| Aug | 26,283 | 28,452 | 31,730 | 38,645 | 36,977 |
| Sep | 26,155 | 27,866 | 31,284 | 36,227 | |
| Oct | 26,657 | 27,930 | 33,213 | 34,442 | |
| Nov | 26,146 | 26,653 | 33,149 | 36,194 | |
| Dec | 26,118 | 26,626 | 34,057 | 36,068 | |
| Jan | 24,871 | 27,656 | 35,965 | 36,257 | |
| Feb | 23,002 | 28,743 | 34,184 | 35,867 | |
| Mar | 25,342 | 29,621 | 32,969 | 38,673 | |
There are multiple times, the markets have gone back to previous year’s Sensex levels. But in the 5-year horizon, does it actually matter? Remember equity investments are meant to be for a long term and not for weak hearted (short-sighted) investors.
How do we deal with these kinds of market volatility? The answer is a repetition of what I had mentioned in my previous blogs.
I repeat a few of the points from my last article:
- Do I have sufficient money in safe instruments i.e Liquid / Fixed Deposits / FD alternatives to cater to my next 3-5 year’s goals & emergencies?
- Do I have an asset allocation (Financial) plan as per my financial goals?
- Does this news impact my earning or saving capacity? If yes, it’s time to sit back and review and re-organize. If no, continue with asset allocation and continue investments.
One last but not the least thing to remember is to stay calm in such phases and have very moderate expectations of returns in such years. Returns are made only when invested for the long term with consistency.
Stay calm and continue with your financial plan.
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