Markets have crashed, what next?

September 26, 2015

Markets have crashed, what next?

With the recent crash in the markets, what do you do next?

Focus on risk? 

As I am writing this article – I had just done an hour’s interview for a documentary on the Mini-bonds saga in 2008. About 20,000 investors invested an estimated a few hundred million dollars.

Vulnerable investors (age 60 and above with low education) got all their money back, whilst the majority of the other investors received partial refunds.

After being questioned for an hour on – why did this happen? Who was responsible? Will it happen again? – You can imagine my frame of mind as I am writing this article.

Confusion and different opinions? 

So, the markets have crashed.  As you read or listen to the financial news and market commentaries – some are telling you its a good opportunity to buy because prices are cheap.

Some are warning that the current bear markets may still go down a lot more.

So, what do you do?

Don’t try to catch the market at the bottom? 

My suggestion is not to buy when the markets are bearish.You don’t have to catch the markets at the bottom, before the rebound – as nobody knows when is the “real” bottom.

What you are hoping for is to buy when the markets are in a sustainable rebound – which of course is easier said than done.

Opportunity or pain of a lifetime?

But one thing is without doubt – history shows us that big gains can be made after market crashes. The problem is the fear that the crash may be followed shortly by a much bigger crash.

So, watch the three months 21 days moving average trend line (or other similar indicators) until it turns clearly bullish and the candlesticks are all above the trend line – before you decide to enter the markets.

Watch the trend lines “like a hawk”? 

And since equities (6 months ACWI -10%), fixed income (EMB -5%), commodities (CRBQ -21%) and property (RWO -9%)  are all generally bearish now – you may like to watch all of them “like a hawk” – and who knows – you may soon have the buying opportunity of a lifetime.

Financial history and market crashes? 

Remember the last big crash in 2008, when equities generally fell by about 60 per cent, as well as commodities.

For those who bought after about six months when the trend lines turned clearly bullish – it was arguably, the “buy” of the decade!

Leong Sze Hian

 

 

 

 

 

 

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About the Author

Leong
Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.