Today, Nasdaq is almost up 2% again following Fed Chairman’s speech. I guessed he used the magic word “disinflation” again. The “disinflationary process” in the U.S. economy has begun. Sounds like music to investors’ ears especially equity and growth stocks in particular. Not sure whether there was any short squeeze that drove up the index. I heard some investors were shorting the tech stocks.
Mohamed El-Erian, Allianz’s advisor, said the economy picture is very complicated. You bet. There are so many different readings and interpretations out there. Hence, there are opposite sides of investment decisions. Some sold most of their investments and parked the cash in short T-bills. Some emphasized the importance of always fully invested because it is just very hard to time the market. Both sides have strong convictions and rationale backed by historical data or technical analysis. Who do you trust?
I trust that it is hard to trust anyone. LOL! I trust that the future is hard to predict. Therefore, it is better not to pick one position and put all eggs in one basket of that particular position. Therefore, the word is diversification again.
Since we can’t rule out of recession, some of us might lose our jobs. We definitely need to beef up our emergency fund just in case. Some saved up to 3 to 6 months living expense. Some aim for 9 to 1 year. It depends on each person’s situation. However, something is better than nothing.
Now, the Canadian long government bond is relatively cheap. If there is no bond in our portfolio, perhaps we can add some.
Anyhow, the tech stocks have increased by more than 15% this year. Many of us hold a lot of them and have been waiting for it to bounce back. If we have too much of it, perhaps we can sell some if the price increases a bit more.
Anyhow, just a few ideas to diversify. The reality is fascinating. It is better to get rid of the guessing game because we don’t want it to be a gamble.