3 key reasons: Time to get cautious on US equities

February 5, 2018

1) The accelerating rate-of-change of US interest rate hike


- The first hike in the recent years was in 2015, second hike was in 2016 and in 2017 alone, there were three hikes. The Fed also mentioned likely to have more hikes in 2018. Means 1x in 2015, 1x in 2016, 3x in 2017 and maybe 3X or more in 2018. A continual increase in interest rates in this uncertain economy is not a good sign, it may cause a lot of pressure especially to businesses and properties that are on a higher gearing.

 

2) The weakness of the US dollar 


- it has started since the beginning of 2017. To date, it has depreciated about 15% and that is concerning for a US dollar currency. To reason the hikes attributed to the heating-up of US economy would be a superficial analogy. I suspect it is very much to do with the weakness of US dollar than an over-heating US economy. Importantly, we have to ask this, what is the cause of this weak US dollar? What Fed needs to do to make US dollar attractive again?

 

3) Two weeks of interesting price behaviour


- In the last week of January 2018, US equities mostly reaches it’s all time high. However, on the last day of the first week of February 2018, Dow Jones and the rest closed at their weakest in the recent months at -666 or -2.05%. In behavioural science, we believe everything happen for a reason.

 

A responsible investor take-on measured risk investments swiftly, but they spend even more efforts in guarding their investments. Time to re-look and re-strategize. (See disclaimer)

 

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