Probably The Best Time To Invest: Global Stock Rout Extends in Japan

Week 7, 2016

The global stock rout intensified as European index futures indicated shares would add to Monday’s declines and equities in Tokyo slumped by the most since August. The yen reached its strongest since 2014 as Japan’s 10-year yield dropped below zero for the first time and corporate bond risk climbed.

What’s Happening in the Markets this week

• Negative Rates Seen as Option for Fed as BOJ, ECB Pave the Way. Global central banks have opened the door to negative U.S. interest rates, in Wall Street’s view. If the world’s biggest economy weakens enough that traditional policy measures don’t help, the Fed may consider pushing rates below zero, according to Bank of America Corp. and JPMorgan Chase & Co.
• Pound Hurt by `Brexit' Debate as Traders Await Clarity on Timing. The pound is suffering as the forthcoming referendum on Britain’s membership of the European Union looms large. And with no date for the vote having been set, traders are signaling there’s little chance of a sustained rebound in the U.K. currency.

Commodities in Review

• Gold prices have climbed for three straight weeks, the longest rally since at least mid-April. A global slowdown has increased speculation that U.S. growth will cool enough to force the Federal Reserve to wait longer before raising interest rates again.
• Oil Trades Near $31 After Saudi-Venezuela Talks as Bets Increase. Oil traded near $31 a barrel after Saudi Arabia and Venezuela met to discuss cooperating to stabilize the market and U.S. data signaled investors are split on the direction for prices. Futures fell as much as 0.7 percent in New York after earlier rising 1.6 percent.

USA

• More Wall Street Strategists Are Cutting Their S&P 500 Estimates. Amid the normal consensus of bullish calls for stocks in 2016, evidence is mounting that Wall Street strategists are losing their resolve as everything from China to oil and interest rates roil markets.
• Just five weeks into 2016, seven of the 21 strategists tracked by Bloomberg have lowered their projections for the Standard & Poor’s 500 Index amid a rout that wiped more than $2 trillion from prices. The cuts have reduced the average annual estimate, the first time that’s happened this early in a year since the Iraq war in 2003. The S&P 500 is down 8% in 2016, the worst start to a year since 2008.

UK

• Britain’s Stocks Reverse Gains; Randgold Rallies After Earnings. U.K. stocks erased advances, falling for a second day as almost all FTSE 100 Index shares declined. The FTSE 100 Index dropped 1.3 percent at 9:36 a.m. in London, reversing a gain of as much as 0.6 percent.
• The benchmark gauge for U.K. stocks has lost 7.4 percent this year, less than the regional Stoxx Europe 600 Index. The broader FTSE All-Share Index lost 1.2 percent on Monday, while Ireland’s ISEQ Index slipped 2.3 percent.

Europe

• European Stocks Decline for a Sixth Day on Global Growth Concern. The Stoxx Europe 600 Index slid 0.6 percent to 324.06 at 9:05 a.m. in London, heading for its longest losing streak since June. It is trading at about 14.2 times estimated earnings, and about 18 percent below its April 2015 peak.
• A gauge tracking equity swings has jumped 42 percent this year as the Stoxx 600 has lost about 11 percent. European stocks fell 4.8 percent last week in volatile trading amid investor concern over oil prices, earnings and the strength of the U.S. and Chinese economies.

Asia

• India’s Rupee Declines Most in a Week as GDP Report Eyed. India’s rupee fell the most in a week ahead of a report that will likely show growth in Asia’s third-largest economy slowed last quarter. Gross domestic product probably rose 7.1 percent from a year earlier in the three months ended Dec. 31, after a 7.4 percent increase in the previous period.
• A median estimate in a Bloomberg survey shows before data due after the close of markets, Global funds have withdrawn a net $1.7 billion from local stocks in 2016, making the rupee Asia’s worst-performing currency this year.

Emerging Markets

• Emerging Currencies Gain With Middle East Shares on Oil Rebound. Emerging-market currencies advanced, led by Russia’s ruble, and shares in the Middle East climbed amid speculation Saudi Arabia and Venezuela will cooperate on stabilising crude prices.
• The MSCI Emerging Markets Index decreased less than 0.1% as six of 10 industry groups retreated, led by consumer discretionary and health care stocks, while material and energy members increased. Companies on the gauge are trading at an average valuation of 10.9 times projected 12-month earnings after a 6.9% decline this year. That compares with a multiple of 14.7 for the MSCI World Index of advanced-nation shares, which has retreated 8.3% this year.

How to Make the Best of This Bear Market

• Be a disciplined investor - Small investors should continue with their regular savings plans to make the most out of the upcoming market volatility. This may seem like an oft-repeated dictum, but experts insist that the right approach at this time is to maintain one's asset allocation. It is a time-tested principle of investing which has proven its value over multiple market cycles.
• Simply put, it helps you average out purchase price over a period of time while capturing more units when prices are low and less when prices are high. When the market bounces back, the units bought at lower levels provide a huge boost to the overall return.
• “This is perhaps the best time to start a regular savings plan if you have not already done so, as your instalments will begin when pessimism is about to peak out,” says Kaustubh Belapurkar, Director - Fund Research, Morningstar India

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