In my interview with Reuters for their lead stocks story of the day before the markets opened this morning, I discussed with them my views on the markets, what investors and traders will be keeping an eye on today and tomorrow, and the markets’ reaction to yesterday’s Fed statement, describing yesterday’s selloff as a “knee-jerk reaction”. I also mentioned to them that the dust should settle today and that we should be seeing the markets turn back green.
What you need to keep in mind about 2016 is that it will be one of the most difficult years for investors and traders to navigate without the right investing/trading style and accurate navigation maps, and what you have seen so far has been nothing but a preview of what is to come.
Volatility is the name of the game for this year and the large swings that you have seen so far are here to stay, not only in equity markets but in most other markets as well.
A buy-and-hold strategy will simply not work this year. As a matter of fact, 2015 was much better suited to that kind of strategy than 2016 will ever be, and we all know how that year ended!
The MSCI World Markets Index closed the year 0.48% in the red and even the most profitable hedge fund in 2015, which was the Bridgewater Pure Alpha Fund, returned only 4% profits for the entire year according to an LCH Investments poll of 2015’s top 20 hedge funds in the world.
This year’s volatility rather calls for an active investing/trading style. In 2016, the markets will provide active investors, traders, and money managers with a number of truly amazing profit-making opportunities and will punish the inactive ones. This year will be a year in which fund managers will have to work extra hard to earn their money!