The Conference Board in the US reported that their index of leading indicators rose 0.7% in June. This is the third month in which this index has risen. This leading index is a gauge on the economic outlook of the US over the next two quarters. Hence, it is looked at very closely as it gives an indication on how the US economy may be faring in the next 3 to 6 months.
The leading index was up 12.8% on an annualized rate over the last 3 months and the fact that it has risen for 3 consecutive months in a row is also an indication that the worst is over for the US economy and that a recovery is happening. Where such economic data is concerned, sometimes, data for just one month may be a blip, but 3 months in a row generally denotes an unmistakable trend.
Given the importance of the US economy to Asian economies and hence, its markets in general, this is yet one more sign that investors were waiting for. More confirmation and “hard data” coming in to show that the economy is finally recovering. Asian markets have in fact been rising strongly since last week on the back of more positive data flowing in, including positive guidance from bell weather companies like Intel, JP Morgan and Goldman Sachs, and from the positive second quarter GDP results of China and Singapore.
More investors who were waiting on the sidelines before this will come back into the stock markets on such news. Others who have been desperately waiting for markets to come back down may also decide that they don’t want to wait any more for fear of missing the recovery entirely. These will increase rather than decrease as the next few months go by, because I see the data getting more positive, not less.
At times though, markets will trade flat for the day, or even experience corrections. This should be expected. In any type of market recovery, there will be profit taking and corrections. However, even when there are the “slower” days, the downside appears to be limited. The short sellers know they are facing an improving global economic environment. To short sell in such an environment takes a lot of bravery (or outright foolhardiness). Hence my strategy over the past few weeks where by once there is some dips in the markets, I put in fresh monies. I didn’t want to wait for some 15 to 20% fall because I don’t think it will happen.
As always though, be aware of your risks when investing and you will sleep well at night. Don’t over commit yourself to risky areas. I have been adding on dips since I started this blog, and though my stance on the upcoming economic recovery was quite clear, I still added 20% of my new monies into emerging market or high yield bond funds.
On a side note, Fundsupermart is now having a 1.5% sales charge promotion on 38 funds up till 15 August. Our research believes that as economies recover, markets will run up and so, we have chosen to further incentivize investors by having a huge number of funds at a lower sales charge of 1.5%. These funds are not only on our recommended list, they are also our most popular funds as you will recognize on the list. It shows our willingness to stand by our belief that to us, it is the customer that comes first, and we want you, our Fundsupermart customers to make money. Hence, because we believe so strongly that the second wave of the bull market is imminent and will happen over the next 6 to 12 months, so we are willing to demonstrate our belief by making less money from our sales commissions by charging a lower sales charge on so many funds. So, make use of this opportunity!
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