How to Position in Stock Market with US Interest Rate Hike?

After the last 1 year of global stock market correction, there are many undervalue stocks with growing potential.  Stock traders and investors have the following key questions for Dr Tee:

 

Q: How will the potential US interest rate hike affect global stock markets?

Dr Tee:  Historically, US would increase the interest rates from the low during the bullish markets, eg. in years 1994 and 2004, when the economy was improving.  Global stock markets would then enter the second phase of bull run for a few years before reaching the peaks of stock markets, eg. in years 2000 and 2007.  The same currency cycle may repeat itself when US starts to increase the interest rate this year.   The recent global stock market correction has helped to reduce the mid-term risk due to potential US interest rate hike because many traders have either taken profit or cut loss during the uncertain market.  With stronger US economy, unemployment rate in May 2016 at only 4.7%, the US stock market may continue to grow, supporting the rest of lagging global markets until the last straw which may eventually break the camel’s back, a real market crash. Read further to understand the correlation between macro economy and stock market.

 

Q: Why the global stock markets did not crash after last 1 year of correction?  Am I too late to profit from the possible stock recovery?

Dr Tee:  Market always has uncertainties which create greeds and fears among the traders. Most people are too normal, when seeing friends and colleagues losing money in stocks over the last few months, they prefer to sell stocks or not doing anything.  A wise trader or investor would learn to leverage on fear factor of majority, buying good stocks at low price, then selling high to those speculators who want to buy high sell higher.  The timing now could be just nice for traders to benefit from the recovery of global stock market but we must learn what to buy, when to buy and sell.  Investors would require more patience. Stock market sometimes is a zero sum game, the majority of traders pays for tuition fee to the minority who have mastered the secrets of buy low sell high.

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