The stock market will bounce back,
but not before stealing half your soul first!
In times like this…
just pop a sour lemon candy and pretend everything's fine!
Back in Singapore, as the situation develops into a global economic issue, there's little the government can do besides issuing GST vouchers, offering aid to businesses, and calling for national solidarity to help citizens ride out the crisis—funded, of course, by taxpayers’ money. Eventually, they will cite budget spending increased, helping the poor and use them to justify the earlier GST hike as a necessary move.
We’ve seen this pattern before after the COVID-19 crisis, when government taxes rose once again. Ultimately, it’s the citizens who foot the bill—and it looks like history is set to repeat itself.
In the early stages, Singapore may benefit from trade orders being diverted from countries like Mexico, Japan, Malaysia, China, and India due to global trade tensions. However, if the situation drags on, overall trade is expected to shrink as worldwide demand drops significantly. With business activity slowing, downsizing and retrenchments could worsen.
Like most people, I’ve also been affected by the recent downturn. As I’ve just transitioned into a new career, I’ve reduced my market exposure—I simply don’t have the time to follow Trump’s every mood swing or try to anticipate what he’s going to do next. Meanwhile, the Dow Jones Industrial Average has plunged more than 1,500 points over just two trading days…
The S&P 500 has dropped over 10% in two days, marking only the fourth time this has happened since 1952…Trump’s tariff policies have stirred up a market storm and may even trigger a recession. Fed Chair Jerome Powell said on Friday that the tariff impact has exceeded expectations. Still, the Fed won’t rush to cut rates until it’s clear that price hikes won’t lead to inflation…
The Nasdaq-100 fell over 20% from its peak, entering a technical bear market…
The Philadelphia Semiconductor Index has dropped nearly 40% from its July high last year—making it the hardest-hit sector in tech.
Even the usually optimistic Wedbush Securities remarked that while the tech industry is America’s most valuable asset, the tariffs have struck a heavy blow. Analyst Dan Ives believes the upcoming Q1 earnings season will be bleak, with most tech companies likely withholding forward guidance amid heightened uncertainty.
🔸 Will U.S. stocks fall even further?
When the market is gripped by extreme fear and everyone starts selling, investors must ask: What’s next? Will this downward momentum continue, and are there more catalysts that could push it even lower?
I recently watched an insightful interview with Howard Marks of Oaktree Capital, which resonated deeply and expanded on my previous post about how “the real challenge of investing lies not in prediction, but in the tug-of-war between logic and emotion.” Here are some extended reflections:
🔸 A Time of Massive Market Shifts
Marks believes the current protectionist trade policies represent the most significant economic shift he’s witnessed in his career. For nearly 80 years after WWII, global trade and specialization brought about one of the best periods of economic growth in human history.
But now, the U.S. is shifting toward trade restrictions and isolationism. The benefits of globalization are at risk—rising production costs, worsening inflation, and reduced efficiency as countries lose the ability to focus on their comparative advantages. This could lead to higher costs and lower living standards globally.
For U.S. capital markets, this means reduced appeal. Former advantages like regulatory clarity, predictability, and stability are fading. Add to that the mounting fiscal deficits, growing policy uncertainty, and shifting international relationships—all of which can shake global confidence in U.S. assets, the dollar, and Treasuries.
🔸 Is It Time for Fear—or Greed?
In the interview, the anchor asked Marks, “Should investors be fearful or greedy right now?”
Marks paused for a moment and replied with a department store analogy:
“The store next door just put everything on sale. Prices are down—like how the S&P fell 8% in two days and even more over the last six weeks. Things are discounted, and that should encourage people to buy.”
“But will prices go down further? No one knows. Are they fairly priced now? No one knows either. But when prices drop, everyone runs from the market because they assume it means risk. In reality, it just means things are on sale.”
As a seasoned investor in the high-yield credit space, Marks noted that while the market has seen sharp declines, there are still opportunities. For example, the yield on high-yield bonds rose from around 7.2% six weeks ago to nearly 8%—which also means bond prices have dropped.
Credit investors often ask: “Will I get paid?” Bonds offer more predictable fixed returns and potentially higher yields, with relatively controlled default risk. “If they don’t meet their obligations, they lose the company.”
In contrast, Marks is more cautious on equities. Historically, the stock market has returned about 10% annually over the past century—but that was based on a P/E ratio of 16. Today’s ratio is 19, above the historical average, which may translate to expected returns of just 6–7%.
🔸 The Essence of Investing: Don’t Predict—Prepare
One of my favorite quotes from Marks is: “You can’t predict, but you can prepare.”
No one can predict the market, but we can learn from history. Investing is a game of probabilities—we should lean toward the side with the higher odds.
Interestingly, investing in the S&P 500 is a positive-expected-value game. If daily market volatility is around 1%, a $1M investment might gain or lose $10K each day. But because the long-term trend of the market is upward, staying in the game long enough usually beats short-term fluctuations. The challenge is resisting the urge to panic during temporary downturns—a reason why many investors exit too early.
Over a month ago in a livestream, I mentioned that the market was going through a shift in sentiment. No one knows how long it’ll last, but price and volume trends often reveal emotions before fundamentals do. Back then, it was clear investors were pricing in a recession. I took a conservative stance and didn’t add positions even during rebounds.
Was I trying to predict? No. I was preparing for potential risks. Hedging is something you do before the risk fully materializes. There are many ways to hedge—some use options, others shift to bonds or gold, some just hold more cash. The goal is to reduce portfolio volatility.
Successful long-term investors prioritize risk management over returns. That’s why many now admire Warren Buffett for holding large amounts of cash—giving him “dry powder” during this downturn. Yet during the bull run, this same strategy was criticized. Such is the emotional swing of markets.
🔸 Risk Management: Focus on What You Can Control
Buffett famously said: “The first rule of investing is never lose money. The second rule is never forget rule number one.”
Is it really possible to never lose money? Not in the short term—drawdowns are inevitable. But over the long term, the market rewards discipline.
“Don’t lose money” means putting risk management first. True risk is the permanent loss of capital—not short-term dips. Avoid going all-in during euphoric times, and during downturns, seek industries and companies that create real value. Buying great assets at reasonable prices is the key to long-term success.
That’s the market we’ve been facing: a dramatic shift from extreme optimism to deep pessimism. We’re bombarded with trade war headlines, speculations about Trump’s next target, and potential retaliations from other countries.
But rather than trying to predict an uncontrollable future, a better question is: What can we control?
Start with your money. How should it be allocated?
Lastly, it’s crucial to recognize the gap between the risk you think you can handle and the risk you can actually tolerate. Many overestimate their risk tolerance—until the pressure hits and poor decisions follow. If you feel overwhelmed, take a step back. Gaining distance from the noise of geopolitics and economic storms can help you see the market with greater clarity and calm.
@TigerStars @Tiger_comments @TigerPM @Daily_Discussion @TigerObserver
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