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Is the Current Market Situation a Cause for Concern or Opportunity?

It has been a little while since my last post.

And I guess the market situation has changed a little since then, so I thought of penning my thoughts down on the situations for some of the markets namely the U.S market, China market, and also Bitcoin.

So far, here is the YTD performance for these markets.

  • S&P 500: +8.03%

  • SSE Composite Index: +2.84%

  • Bitcoin: +56.42%

At the end of 2023, I did a poll in my telegram group.

I asked the audience which of the three scenarios they seek most likely to happen in 2024.

  1. China Equities rebounding

  2. Bitcoin hitting $100,000

  3. S&P 500 hitting 6000

Majority of the audience thinks that China equities rebounding sharply seems to be the more plausible scenario. I personally think that Bitcoin hitting $100,000 is the most likely one.

It is still very early in the year and I guess the jury is still out on this.

However, this makes me realise something. Perhaps, a majority of my readers are actually contrarian investors.

Contrarian investing represents an investing style in which investors go against the market trends. When the stock is under heavy selling pressure, you buy, When the stock is under heavy buying pressure, you sell. Sometimes, this can be understood a little like value investing. In value investing, you tend to buy assets at depressed pricing which is similar to what's happening with contrarian investing.

When the poll was conducted, this was the situation for the U.S market, China market, and Bitcoin.

  • S&P 500 was at 4,800 level, representing a +20% growth in 2023.

  • SSE Composite Index was at 2,900 level, representing a -6% growth in 2023 and also a straight decline for 3 years.

  • Bitcoin was at 41,000 level, representing a +150% growth in 2023.

Till date, the S&P 500 index continues to grow and Bitcoin prices continue to soar. Momentum is certainly on their side. Specifically for Bitcoin, the ETFs approval and halving event are catalysts for explosive growth this year. In fact, these are already well anticipated events that we already know will very likely happen this year even during December 2023.

Despite this, the poll results highlight that most still think China equities rebounding has the best chance of happening. This is despite a very bad record of the China equities in the past 3 years, and also the constant onslaught of political and economical measures that happened in China from 2021 to 2023. Even when the signs aren't positive, most choose to think the rebounding of China equities is imminent. It's a clear sign of a contrarian investing mindset.

So given the current market conditions, is this situation now a cause of concern or opportunity?

I realise that there isn't a clear answer on this, and it all depends on your investing mindset.

If you have a strong contrarian investing mindset, the situation with China equities now is definitely a cause of opportunity for you given the continued lacklustre performance of China equities. In comparison, the Bitcoin and the U.S market will then be a cause of concern for you as you could have already believed that they are overvalued.

If you have a momentum investing mindset, the situation with U.S market and Bitcoin will be a cause of opportunity for you as they continue to outperform. Similarly, the China market will be a cause of concern for you.

I don't think or know if either of these attitudes is superior to the other. In my investing history, there are times when being contrarian reaps good benefits. I still remember trying to buy more Shell shares when most people are dumping shell shares in the early days of Covid when the company first announced a dividend cut in decades. It turns out to be a good investment as Shell shares recover in prices and also continue to grow its dividends. But obviously, my investment in the China market in the past 3 years didn't reap any benefit at all as it has been on a free dive.

On the other hand, my continued investments in the U.S market and Bitcoin despite constantly making good gains in the past 1 to 1.5 years have also put me in a good position. If I am a 100% contrarian investor, I could have sold these winners and started putting more into the China market which will probably erode my gains in no time.

I guess it is important to remain balanced in your investments at the end of the day. Having an extreme mindset by being a 100% contrarian investor or 100% momentum investor is likely the worst decision you could make. Being a 100% balanced investor is what you should shoot for.

Like what I have mentioned multiple times in my blog, there are only essentially two things you need to do to grow your portfolio.

  1. Create a well balanced portfolio

  2. Do nothing and allow your portfolio to grow

Till the next time.

I share regular content in my Telegram channel. 230+ like-minded investors have already joined this channel. Please join if you are interested to follow my content.

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