Saturday, April 18, 2015

Fear of heights: Reviewing my 2014 forecast

Financial bloggers like to make predictions because their followers like to read them.

Since it is almost free, I decided to gaze into the crystal ball made the following prediction on 18 Jan 2014:

3 Month Outlook: Bear market and volatility
6 Month Outlook: Bear market and volatility
12 Month Outlook: Recovery

Based on the chart below, I got the 3 month outlook partially right. The market was volatile from January to April 2014, with two corrections but it ended higher overall. 

I got the 6 months outlook wrong. It was pretty much a bullish recovery after early February, if you look at the January to July 2014 period. 

However, I got the overall trend right for the full 12 months. That said, from July 2014 to January 2015, the market was very volatile, with at least 4-5 dips.

Looking ahead, I managed to get the 3 month outlook for my latest forecast right and I expect the bull market to continue until the end of the year.

Here comes the tricky part. If I am calling the bull to reach its peak over the next 6-12 months, should I consider realizing all the gains and sit on cash? I could perhaps wait for the market to crash and then reinvest the monies.

One window of opportunity would be somewhere in September. Given that it will be after the SEA Games and the SG50 National Day, I expect the PAP to call for general elections in the September school holidays to capitalize on the groundswell of goodwill generated by LKY’s passing. When the election is called, I will start offloading my holdings because I dare not guess the outcome of GE2016 (that is another blog post).

But If I get this call wrong, I would miss out on the remaining upside.

The current Bull Run has been going on for some time, but it is not very old. If you count the bottom formed in June 2012 as the official start of this current long term bull market, it is at least 34 months old. The past two bull runs have lasted close to 5 years. Moreover, while the sentiment “feels” optimistic outside the oil and gas and commodities sector, there is not the bubbly euphoria. In fact, there has yet been an IPO on the SGX for the first quarter of 2015. IPOs are one of my market peak indicators

What do you think?

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