13 March 2012 was a significant day for stock markets. Finally, the Dow Jones and S&P 500 convincingly broke through the psychological 13,000 and 1,375 respectively, a very bullish sign, re-affirming the uptrend that started at the end of last year. The bull run is now in its 4th month.
As a result, the Singapore STI broke through the 3,000 barrier once again and is also affirming the uptrend that started just this month.
My personal opinion is that we are just at the beginning of the bull run and there is a lot more upside from here. There could however be a usual pullback in May (the usual sell in May, Go Away seasonality pattern- usually a 61% chance of it occurring based on history). Historically, April is usually the most bullish month for stocks historically. So we have at least one more good month to go before markets go through a dip.
These are reasons why I think that there is a lot more upside for markets (especially for the US, Singapore, Hong Kong and Shanghai)
1) Markets are still historically undervalued.
Despite the fact that stocks have been rallying aggressively for 4 months, The PE ratios of the Straits Times Index (PE =9), Hang Seng Index (PE = 9+) and S&P 500 Index (13+) are still below the historical median PE of 15 and historical top of 23-25.
2) Technical analysis indicators confirm the uptrend of markets where prices are above the 200 DMA and the 50 DMA have crossed over the 150 DMA. This is a clear sign of a confirmed uptrend
3) The US economy is showing stronger signs of recovery and growth. US retail sales, manufacturing index, employment data, GDP growth have all exceeded analysts and economists forecasts. At the same time, fears that a European sovereign debt default will trigger a second financial crisis has abated. Despite the fact that Greece technically defaulted, markets did not react negatively at all.
4) The Aunties and Uncles (amateur-man on the street- investors) are not fully buying stocks yet. Many are still staying on the sidelines. I can see that they are only just starting to buy now. So there is alot of cash on the sidelines that have not been fully injected into the stock market.
Once the amateurs start to buy aggressively, they will push prices up higher and higher (eventually to unsustainable levels). Meanwhile, they should provide the catalyst to propel stocks higher from here. Remember that once everyone is optimistic about stocks and your auntie starts punting, its time to get concerned. That is not happening yet.
As investors begin to take on more risk, you can expect CYCLICAL STOCKS (e.g. Banks, real estate, commodities, industrials etc…) to start outperforming and DEFENSIVE STOCKS (e.g. SPH, Coke, DairyFarm, ComfortdelGro, McDonalds) to underperform.
5) The Bond Market is finally beginning to sell off after a long, protracted bull run over the last 6 years. What this means is that investors are beginning to sell their bond holdings in order to re-direct their funds into the stock market. This will again provide additional fuel for the equities market.
A Peek Into My Stock Portfolio
Normally, only graduates of my Wealth Academy program will get regular updates on what I think are the best investment opportunities and get the chance to access my live portfolio of stocks.
Here is a sneak peek into what I have invested in over the last few months. Some of my stock picks have already begun to show some great returns while some of my stocks are yet to skyrocket (they all do eventually).
At this point of time, I believe that the best investment opportunities are in US bank stocks and US home building stocks. US banks like Citigroup, Goldman Sachs, Bank of America and Wells Fargo are current selling at up to 40%-60% lower than their Book Value, despite showing a very strong financial position and string earnings recovery. This is a rare opportunity to invest in these banks at 40%-60% discounts, giving you the chance to more than double your money in the months & years to come.
The First Step Is To Invest In Yourself
If you want to learn the strategies of how to achieve consistent profits from the stock market and how to spot the best money-making opportunities, you need to first invest in your financially education. That is why I spent the last 11 years writing books to share my knowledge. These are books like ‘Secrets of Self-Made Millionaires’, ‘Secrets of Millionaire Investors’, ;Profit From the Panic’ and ‘Profit From the Asian Recovery’. You can get these books in local bookshops in Singapore, Malaysia and Indonesia and well as on www.amazon.com.
If you want to become a professional investor and to truly master the art of making money in the markets, you can get live personal training from me and my team of investment strategists at Wealth Academy.