In today's Exponential Investor...- Why footballing heartbreak is like a bear market
- Switching off from the markets when not much is happening
- The key themes for investors today
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The heartbreak of a bear market after a long bull run.
Some investors will know the feeling well.
The party is at its most intense just before the fall. The celebrations more jubilant, the confidence at its highest.
The bull market in England football wins was so long we almost forgot what defeat felt like. We thought we could keep winning forever.
And then in an instant, everything we took for granted was gone.
In football, it took penalties to end our glorious run.
In the markets, who knows what it will be.
But that feeling is the same. Reality altered, hope crushed.
And as so often, it can be the brightest stars which falter first. The best performing stock finally tumbles, the 19-year-old wonderkid misses a penalty.
But as in 2000, there's a reason that sector, stock, or player was generating so much hype. They still have a glorious decade or two ahead of them, and they'll be back.
Such is the way cycles work – in the markets and in football.
Nothing moves in straight lines.
For me, after two weeks of Covid and being switched off from the markets, I see how little has changed.
It's hard, as a newsletter writer, because you have to assign significance to the weekly machinations of the news and the small fluctuations in the markets.
But often, patience and ignoring the noise are the best things for your money.
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At the same time I do believe it's worth staying on top of the rolling trends beneath the market.
At the moment, it will pay to have an eye on the Federal Reserve as it wrestles with the fact that it's stimulating an economy that might not need stimulus any more.
A change of direction would be very interesting, as central bank support has been so crucial to the extension of this 12-year bull market.
Another theme is the ongoing battle between tech and growth stocks, and cyclical value stocks which should benefit from the reopening.
Many believed that value's time had come, and that the growth party was over, but as in the football – things never happen in straight lines and the old growth story seems to have some life in it yet.
Finally, the covid story itself isn't over yet.
The UK is set to reopen completely, removing all restrictions just as cases soar once more.
The hope, which I share, is that thanks to vaccinations, all the most vulnerable people should be shielded from its worst effects, and that cases can rise without a serious spike in hospitalisations or deaths.
However, simply because we hope something's true doesn't mean it definitely is, and if cases do continue to soar, I wouldn't be surprised to see some backlash against the reopening.
Backward steps in that particular field could knock people's confidence, although markets seem to have broadly moved on from the lockdown story.
It is more likely to impact the growth vs value story than the overall level of the market, but for UK investors this really matters, as our UK stocks are much more value/cyclical than most.
Anyway, these are the big themes of today, but investors can, if they desire, take a leaf out of my Covid isolation book and try to ignore some of the day-to-day tribulations in the market. It's very relaxing, let me tell you.
All the best,
Kit Winder
Co-editor,
Exponential Investor
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