Understand the Market

  • Are you still hoping to catch the market?

Buy low, sell high. That’s something every investor hopes to achieve. However, can we really catch the market at the right time? Understand the unique characteristics of the four main cycles of economic expansion and contractions to help you make informed investment decisions, hence better potential returns.

BOOM

BOOM

Commodities Outperform

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SLOWDOWN

SLOWDOWN

Cash Outperform

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Occurs when a country's national output (also known as Gross Domestic Product (GDP)) is rising strongly. There is usually high demand for goods and services as employment rate is expanding, and companies have increased profits.

 

During this period, commodities tend to outperform other asset classes and investors may focus on tactical and equity investments.

Occurs when a country’s rate of growth slows down, but national output (also known as Gross Domestic Product (GDP)) is still rising. Unemployment rate may start to climb and overall productivity and company profits starts to decline.

 

During this period, cash tends to outperform other asset classes, and investors may start to look at safer and more defensive investment solutions.

RECOVERY

RECOVERY

Equities Outperform

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RECESSION

RECESSION

Bonds Outperform

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Occurs when real national output (also known as Gross Domestic Product (GDP)) picks up from the low point of the recession. Productivity starts to improve and employment improves.

 

During this period, equities tend to outperform other asset classes and investors may start to take more risk by investing into equity and high yield bonds.

Occurs when there is a fall in the level of real national output for two consecutive quarters (i.e. negative economic growth). When this happens, there will be increased unemployment, and personal incomes and company profits fall.

 

During this period, bonds tend to outperform other asset classes, and investors may look into high quality bond investments.

Key Economic Indicators
  1. Consumer Price Index (CPI) measures changes in the price level of consumer goods and services purchased by households
  2. Producer Price Index (PPI) measures the average change in selling prices received by domestic producers of goods and services over time.
  3. Consumer Confidence Index (CCI) is an indicator designed to measure consumer confidence
  4. Retail Sales Indicator is an aggregated measure of the sales of retail goods over a stated time period.
  5. Gross Domestic Product (GDP) is indicator of the economic health of a country, as well as to gauge a country's standard of living.
  6. Purchasing Managers Index (PMI) is an indicator of the economic health of the manufacturing sector.
    (Above 50 = Expansionary phase / Below 50 = Contractionary phase)

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