November 21, 2023, 10:26 am EST
Dual Tracks of Bulls and Bears
It could be very confusing as both tracks of bulls and bears are presented in our eyes. As Nasdaq-100 made a new historical high with 45% gains in 2023, China Shanghai and Hong Kong indexes are hovering around the year-low areas. Also, inflation cooling and near record-high housing created more confusion on which directions the economy is going for 2024.
We believe this phenomenon would continue as the Fed should pause the rate hike. When it begins to lower the Fed Fund rates, it is the transition so-called “Soft-Landing”. It means to avoid recession during the economic slowdown.
The short-term spike, like it occurred almost a month with double digits gains in the major indexes came in both technical short-squeezed and fundamental shift from tightening to easing on its policy.
However, the short-term run-up cannot defeat the long-term decline in the stock markets, in our opinion. It is not easy to adjust strategies in terms of trading or investing as the markets make sharp turns in both directions. One reasonable approach would be to stay light in holding positions and heavier in cash.
Holding positions can be in defensive type with high dividend paying stocks. For example, we have held Verizon (VZ) since the end of October. It kept going up with a steady uptrend pattern. Also, VZ gave more than 7% of dividends so it adds up the total gains during this type of market.
