Having felt bruised and battered through the whole of Q4 2018, the thought of getting “back in the water” is one that brings with it a certain amount of trepidation. But if I feel like that then I am likely not alone; far from it in-fact.
Markets are repairing; human nature says we will ignore it for a while longer but it is definitely happening. I like to keep things simple: the 200 day moving average of the S&P 500 (red line below) never actually turned negative; the 50 day moving average clearly did (blue line below) but how much damage was really done? What is interesting is the 50 day moving average has stopped falling and is actually flattening; is the next move up or down?
Given that, so far, results season has seen companies generally producing results that are in line or not as bad as expected and rallying as a result (with the exception of defensives), it is likely markets have bottomed, at least for now.
So whilst getting back in the water is uncomfortable; the fact that there are 489 species of shark and only three of them have fatally attacked humans 10 times or more in history; the chances are the water is one of the safest places to be; so let’s buy some equities.
Opinions and views from the Equities team at Kames Capital are not an investment recommendation, research or advice and should not be considered as such. Content discussing investment strategies and stocks is derived from and solely relates to the investment management activities of Kames Capital.
About the author
Neil Goddin is Head of Equity Quantitative Analysis and also has joint responsibility for managing funds within the Global Equities team. In addition to investment management responsibilities, he leads the team responsible for building and maintaining the Kames equity investment screen, which is used across the equity team, and advising on optimising risk levels in the funds. Neil’s role differs from most typical quant professionals as he sits within the fundamental team, has joint responsibility for managing funds and is an integral part of the equity team; rather than the more traditional model where quant teams sit separately, away from investors. Neil joined us in 2012 from LV Asset Management where he was Head of Investment Risk. Prior to that, he worked for WestLB Mellon Asset Management and Deutsche Asset Management in various risk-management roles. He has 20 years’ industry experience and is a Certified Risk Manager by the Global Association of Risk Professionals*.
*As at 30 November 2018.