Breaking Down COVID-19 By Understanding How Traders Think
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Why are Markets rallying even when the COVID-19 situation persists?
What's going to happen to the Markets, based on the current numbers & economic data?
In this three-part report, we look at the impact of the coronavirus outbreak on the economy, financial markets, and consumer behavior. In part one, we look at the various government and central bank responses to the coronavirus outbreak. We explain why stock markets have rallied strongly in response. We also look further ahead and assess what the medium to longer term impact on markets might be.
In part two of our report, we look at the business and stock market cycles. According to research, the stock market acts as a leading indicator for the economy, looking forward between three and six months. Relative sector performance is also different as the cycle progresses from contraction to expansion, that is, some sectors will outperform others. Various surveys and anecdotal evidence suggest that consumer behavior will change and that we will have a new ‘normal’ in the post-COVID 19 world. That matters because the relative performance we come to expect from certain business sectors may not occur or may occur at a much different stage in the cycle.
Finally, in part three, we look at the possible changes in behaviour because of the pandemic. We combine what we learn in parts one and two and form an investment roadmap. We find that the information technology sector is the main driver of the current stock market cycle along with certain parts of the health care sector. The medical and health crisis generated by the coronavirus outbreak has focused attention on healthcare and biotechnology stocks. We also share the Singapore perspective and find that the local market shares similar but not the same exact market trends.
This report is only to be read on our website or app and cannot be downloaded.
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About The Author
About The Traders Guild
The Traders Guild is an initiative from 5 experienced traders and investors, prominent and seasoned in the financial markets - coming together to help retail investors get better results through a subscription service called the Traders Dashboard. Visit the Traders Dashboard here.
Li Guang Sheng is a Principal Trading Representative with one of Singapore’s stockbroking companies. He serves a diverse pool of clients including retail investors, public and private corporations and associations as well as hedge funds. Li also manages share buybacks, private placements, bond and equity deals and participates in financing transactions. He is a firm believer in value investing. Fundamental analysis with emphasis on intrinsic value and yield forms the basis of 90% of the recommendations and advice he shares with his clients. Li graduated from the National University of Singapore with a Bachelor in Arts and Social Sciences (Economics) with Merit.
Larry has close to 30 years of trading experience. He was previously a trading representative, holding licences to transact both stocks and futures. Larry is renowned as an intraday specialist and actively trades stocks and indices. Some of the intraday and short-term trading strategies that he uses are not available in textbooks and applies specifically to Singapore stocks. He was among the first to start one-to-one coaching in trading in Singapore. More than a hundred traders have benefited from Larry freely sharing his wisdom and experience.
Martin Seah is best known for his weekly analysis of institutional funds flow and charting updates which he publishes on InvestingNote.com. He specialises in a number of analyses including Andrews Pitchfork, Volume Spread Analysis and Price Action Analysis. Before he ventured full-time into stock trading, Martin held a management position with a German multinational. Martin graduated from the Royal Melbourne Institute of Technology (RMIT) with a Bachelor of Business (Operations and Transportation Management) with merit.
Dylan Ling holds a Bachelor of Science (Hons) in Accounting and Finance from the University of Essex. He is an experienced accountant and has worked with clients from the investment, consultancy and trust fund sectors. Dylan is passionate about trading the stock market and uses his knowledge of accounting to find hidden gems in the market. He then applies statistics and data analysis to come up with the appropriate trading strategies.Peter Lai has been involved with the financial markets for more than 30 years, as a professional in banking and finance, and subsequently in financial market data. He started trading FX futures in the late 80s and has since ventured into other asset classes including bonds, equities and precious metals. Peter trades with a very short to medium term view but will also take longer bets if the opportunity arises. He invests with a much longer-term view and uses a mixture of bonds, stocks and funds to achieve his long term investment objectives. Peter graduated with a Masters in Economics from the University of Western Australia.