My first post in this quiet space.
My reflections on the first quarter of the year as it comes to an end. From Q4 2024 till January 2025, investors/traders were very bullish about US equities and crypto. Particularly when Trump won the elections. Major indices or even crypto hit an all time high. Many believed that his presidency and administration will be good for the US stock market. It was simplistic at best but nevertheless a belief held by many experts, retail investors that stocks and crypto will shoot through the roof. Well, the exact opposite has happened so far. S&P500 retraced by up to 9%. NASDAQ retraced by almost 14%, BTCUSD by more than 20%. ETHUSD by more than 50%. We may find all sorts of reasons to study and justify why this happened. Maybe it was Trump’s isolationist , inflationary policies with tariffs. Maybe it was China demonstrating its technological prowess with Deepseek that dented all the hype in AI investment. Maybe it was BRICS trying to move away from using USD in their trade transactions. Whatever it is, we should probably not underestimate how geopolitics shapes market sentiment. At the end of the day, it is the results that matters and I do not think the Trump administration is trumping (excuse the pun) China on the world stage at the moment. Just as some people had a simple belief that Trump will be good for US equities, I do have an alternative but equally simple view. Whatever is bad for the US markets will be good for the HK / China stock market and vice versa. For the simple reason that money being pulled out from one market has to be invested somewhere. At the moment, I think it is China.
A few things to learn from this episode of market correction in the US:
- Never fall in love with any stocks or market indices. Be objective. Sure, it can go higher because of irrational behaviour and one may have short term gain as a result. But if you do not realise those gains and think stock prices will continue flying, then all you have are just theoretical gains that will eventually dissipate when market corrects. Take profit when there is extreme market exuberance.
- Following from point 1 above, if you cannot stomach significant retracements in your portfolio, it probably means your portfolio is weighted too heavily in specific industries, concentrated on certain types of stocks (i.e Mag 7), specific geographical markets. Lesson learned is to diversify across industry sectors, geographical markets and asset types (i.e SG bonds, money market funds, precious metals etc. Did not mention BTC or its alt because I am not a firm believer of digital assets ).
- Related to point 2, to mitigate the psychological impact of market volatility and seeing your portfolio value dropped double digits, I do think dividend stocks have a role to play in any portfolio. It may not have the 10x growth that you will see in the likes of some US equities. But at least there is some satisfaction in being paid regularly when the company performs well. Just have to be selective of the companies that has consistently paid dividends (or even increasing dividends) over the years.
That’s it for my reflections in Q1 2025. Nothing new here.