Opportunity In Adversity

Opportunity In Adversity

almost 4 years ago2 mins

Investors around the world are in consternation as stocks – and bitcoin – officially enter a “bear market”. But while some big firms smell a buying opportunity, others are warning that it’s too early to act… ⏰

What does this mean?

Investment managers UBS, Credit Suisse, and Invesco were among those getting in touch with their clients this week to provide reassurance – and advice on updated strategies.

For the two Swiss firms, that advice looked markedly different. Credit Suisse warned that stocks could yet fall further, cautioning against attempts to “buy the dip” before confidence recovers. UBS, however, suggested that investors not only avoid panic selling, but that they consider seizing the chance to load up cheaply on long-term portfolio holdings in sectors such as healthcare tech – as well as potentially using options to bet on a bounceback ☄️

Invesco agreed, pointing out that large spikes in volatility have historically foreshadowed subsequent stock price rises. Speaking of volatility, though, there was bad news for cryptocurrencies on Thursday, as prices of the largest tumbled more than 20%

Bitcoin had its worst day in years, hitting a 10-month low (Source: CoinMarketCap)
Bitcoin had its worst day in years, hitting a 10-month low (Source: CoinMarketCap)

Why should I care?

Intriguingly, even the traditional “safe haven” of super-safe government bonds saw price declines on Wednesday. It may be that derivative-trading investors seeking to cover “margin calls” in the stock market were forced to sell other assets – including, perhaps, bitcoin – to come up with the necessary funds. (Check out our Pack on Futures & Options for more on this risky business… )

A 50/50 US stocks/government bonds approach had its worst day ever Wednesday
A 50/50 US stocks/government bonds approach had its worst day ever Wednesday

While many investors are hungry for cash in uncertain times, they face a tough choice: sit out of the market at super-low or even negative interest rates, or stay invested – but potentially risk more losses.

According to the professionals, however, owning a diversified mix of different investments is the best “hedge” against market madness. Check out our Invest Like Ray Dalio Pack for tips on how to create an all-weather portfolio of your own 🌦

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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