The world is changing fast and to keep up you need local knowledge with global context.
Sean Peche, portfolio manager at Ranmore Global Equity Management, discusses recent global market movements with Victoria Ashwin and shares his insight into navigating the current investment landscape.
The bear market has officially reached stock markets around the world. From the S&P 500 (-18.7%) in the US to the Hang Seng Index (-9%) in Hong Kong, markets are entering bear market territory.
Large companies like Netflix and Walt Disney have sunk 69.4% and 38.2% year to date.
Looking to the future, Peche believes the bear market is not yet over
We’ve had a long, hot summer. It’s been really good times for a long time. The T-shirts and flip flops kept you comfortable in the good times, but they’re not going to keep you warm in winter. The seasons have changed.
Consumer sentiment in the US reaches record lows
In line with this, the Michigan Consumer Sentiment Index is a survey used to gauge consumer confidence in economic activity. Amid rising living costs and record gas prices, this figure was down to 50.2 in June from 58.4 the previous month.
This is the lowest level ever recorded, which just tells you people are not feeling good about the future.
Crypto markets have been battered in the past 6 months
The volatility experienced in Crypto markets, which saw Bitcoin shed 25% in the previous 5 days alone, doesn’t instil confidence in investors and further fuels speculator traders. Crypto has lost over $2 trillion in value since January this year.
Peche asserts that individuals should be mindful when it comes to predicting market movements
You get these short bear market rallies where everyone thinks, sure, thank goodness that’s over. And we thought that recently, everyone’s picking the bottom a few weeks ago then boom, rally. You get a surprise boom and then you’re back in the bear pit.
Talking to a quote by John Templeton, “for those properly prepared the bear market is not only a calamity but an opportunity”. With over 7,000 companies down yesterday and the likes of Google and Amazon down 4.29% and 5.45% respectively on 13 June, does he think it is a good buying opportunity for long term investors?
Peche has a cautionary outlook when it comes to buying shares in a bear market
One has got to be very, very selective. I think one of the big problems that we have now is whether you can rely on future earnings forecasts. Forecasts for large multinationals are going to be really difficult to formulate amidst increasing inflation, rising interest rates and a stronger dollar.
Are people going to rush out and buy a new asset? Are they going to be shopping on Amazon as much as they did? I mean, if they’re spending all their money paying their mortgage and putting fuel in the tank, have they got as much disposable income? Well then, maybe we can’t rely as much on forward earnings.
I think it’s going to be challenging for the currencies, for inflation, for many of the companies and large multinationals. They are going to have some difficult times.
What is your outlook for the rest of the year regarding global markets?
I am focused on the downside rather than on how wonderful the future is going to be. I’m looking at buying companies that I think have limited downside risk. I would argue it is extremely important to protect the downside because I really don’t think this is over.
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- Sean Peche: Despite tanking, Netflix is NOT a value stock – and no, I’m NOT buying it
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