Not Sitting out of the Market

Uncertain.  Gloomy.  Bleak. 

These are some words that one notices when one reads the news concerning world economy.

So is the world approaching a recession or is the recession already here?

Singapore, for now, seems to have averted a technical recession.  In fact, our new prime minister, also the current financial minister, Mr Wong has said quite clearly in July that “Singapore’s economy is not at risk of recession or stagflation at this stage.”  In fact, the government seems pretty optimistic that the Singapore economy will not slip into a recession or stagflation next year although one must take note of the caveat “significant headwinds remain globally.”

What about the world’s most significant economy in the USA?  Discussions on the state of the economy of the land of the brave and free, on whether it has entered recession or not, can be pretty robust and or even heated.  

The US economy shrank by 0.9% in the second quarter of this year.  In the previous quarter, the economy contracted by 1.6%.  Put loosely, a recession is defined to be a period of 2 quarters of negative GDP growth.  Hence by definition, the US is in a recession.  

And if you watch Fox News which is pro-Republican (or pro-Trump), then you get the message that under the Biden administration, the US has entered a recession.  Here’s what Tucker Carlson said on his show on July 29th:

“We’re in a recession. The economy has been shrinking all year. Real wages are at record lows and at the same time, inflation is the highest it’s been in the lifetime of most Americans. So, call it whatever you want, but it’s a recession and it’s scary …”

But is it? Has the US entered a recession and is it then going to drag the world economy down soon?

Well, according to the president who shakes hands with thin air, the US economy is just fine and dandy.  He cited record job growth and foreign business investment as signs of a healthy US economy, the 2 quarters of economic slowdown notwithstanding.  

Up until now, the National Bureau of Economic Research (NBER), the official judge on whether the US economy is in a recession or not, has yet to declare so.  The NBER deems the current labour market to be strong, and business inventory levels to be healthy … so no recession.

What about the condition of the world’s 2nd largest economy?  The Chinese economy registered a 4.8% growth in the 1st quarter before weakening significantly to just 0.4% growth in the 2nd quarter.  

Still not a recession for China’s economy for now but what is the 3rd quarter going to be like?  Will the USA announce a recession in the 3rd quarter?

The economic and political tea leaves seem to point to a postulation that the recession will make its unwelcome entry before the year ends.  Inflation is still white-hot.  Global supply chain is still a tangled mess. Russia’s war on Ukraine is still unabated.  Tension in the Taiwan Straits remain volatile and could spill over into S.E. Asia. The US-China relationship has grown more contentious.

Basically, it is foolish to look at current world affairs, whether politically or economically, with rose-tinted glasses.  Hence I am leaning more towards the view of a recession arresting the world economy sometime in the very near future, if not by the end of this year, then in 2023.

Again I might be reading the recession tarot card wrongly: the recession might come much later beyond my expected timeline or even not at all. Given that I might be wrong, I decide that I should still continue to invest in the stock market regularly while keeping some cash at hand.  Going 100% in cash is counter-intuitive.  After all, it is time in the market that matters over the long run, rather than timing the market which no one is an expert in. 

I continue to DCA into my MoneyOwl portfolio, Syfe Core Equity and Reit+ accounts.

The time-weighted return for these portfolios are as follows:

Money Owl Equity Portfolio: 33.73%

Syfe Core Equity: -11.27%

Syfe Reit+: -2.96%

I used to hold the Syfe Reit+ portfolio but decided to sell all my units so as to get Reits on my own on my CDP account.  However, I am not always diligent in monitoring these Reits all the time myself and find the robo-advisory solution just the answer for investing in blue-chip Reits every month. So last month, I restarted the Reit+ portfolio with Syfe.

I also invest in the US market using Syfe Trade regularly.

The US market has seen quite a fair bit of volatility since the beginning of the year, what with record-high inflation and interest rate hikes.  The S&P 500 has fallen twice into bear territory, the first time just briefly on May 20, and again on June 13 for a longer period of time.  In July the S&P 500 seemed to have recovered some but optimism in Wall Street remained muted.

With all these uncertainties that prevail in market sentiments lately, one can be paralysed to act.  To buy some US growth stocks at reasonable prices or not, that’s the question!  In the end, I decided to the plunge.  To not take advantage of market downturns, whether these downturns are just transitory or protracted, is just such a waste of opportunities.

So I’ve gotten me these stocks on Syfe Trade::

1. Alphabet (Google)

2. Amazon

3. iShares US Aerospace Defense ETF (to take advantage of the global arms race)

4. Microsoft

5. Nu Holdings 

6. Nvidia

7. Robinhood Markets 

8. VanEck Vietnam ETF (to take advantage of Vietnam’s rising economy as manufacturing firms move out of China to Vietnam)

The bond market is also looking attractive. Rising interest rates have made bond yields attractive.  I’ve made an application for the latest Singapore Savings Bond, SBSEP22 (2.8% average return over 10 years).  I kick myself for missing SBAUG22 which offers the highest long yield of 3.0% in SSB history.  The SSB is a good alternative to park excess cash as it is principal guaranteed, and for the September issue, the interest rate is higher than CPF OA interest rate of 2.5%. 

The water may seem disturbed now, with turbulence in the depths beyond detection. So the advice I give myself is to wade in slowly and calmly, and keep my emotions in check when dealing with my investments.

May there be more low-hanging fruits for the picking in the months ahead.

Almost all the great investors I know are unemotional. Unemotionalism is one of the most important criteria for being a successful investor

Howard Marks

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