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E-Book - Ein55 Global Market Outlook 2020
E-Book - Ein55 Global Market Outlook 2020
E-Book - Ein55 Global Market Outlook 2020
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Email: ein55.tee@gmail.com
Table of Contents
1. Mass Market Sentiment Survey ...................................................1
2. Review of Global Stock Markets ...................................................2
3. US Market Outlook .......................................................................7
3.1 US Political Economy ..............................................................7
3.2 Effect of QE .............................................................................8
3.3 US Interest Rate .....................................................................8
3.4 US Job Market .........................................................................9
3.5 US Property Market ............................................................... 11
3.6 US Bond Market .................................................................... 12
3.7 US Dollar vs Commodity (Gold / Silver / Crude Oil) ................ 12
4. Regional Market Outlook ........................................................... 15
4.1 Europe Market ..................................................................... 15
4.2 China Market ........................................................................ 15
4.3 Hong Kong Market ................................................................ 16
5. Singapore Market Outlook ......................................................... 17
5.1 Singapore Stock Market ........................................................ 17
5.2 Singapore Property Market .................................................. 19
6. Conclusions and Recommendations .......................................... 19
Appendix: Economy Master Plan .................................................... 20
Appendix: Free Investment Courses by Dr Tee ................................ 21
1
1. Mass Market Sentiment Survey
Before sharing any personal views on current investment
markets, I often like to begin with a unique “Ein55 mass market
sentiment survey” for my investing workshop audience or readers:
“What do you think of the market trend for the next 1 year?”
A = Bear Market (STI < 10%)
B = Flat Market (STI within 10%)
C = Bull Market (STI > 10%)
Please make your choice before continue reading further. This is
an important move because you will be part of “Ein55 Indicator”
on future market trend.
The participants with diversified background and experience
representing the mass market will cast their votes. Here is the
latest statistics (see Figure 1) based on recent survey: Bear Market
(53%), Flat Market (47%), Bull Market (0%). Please compare
your choice with this overall distribution on market outlook.
This unique Ein55 Personal Indicator is making use of the
psychological weaknesses in traders/investors who usually buy
high (when greedy) and sell low (when fearful). Therefore, the
recommendation of investing calls of buy / sell / hold, is against
the mainstream view:
• Buy: when bear market view > 75%
• Sell: when bull market view > 75%
• Hold: when flat market view > 25% (current market)
The current majority market view (53% bear market & 47%
flat market) aligns well with the current market trend in Singapore
as Straits Times Index (STI) has been falling down from peak of
3600 points, trading sideways most of the time within fair price
of 3000 points 10% (2700 - 3300 points) over the past 10 years.
2
The bearish view is relatively high (53%, more than 50% neutral
line) over the past 2 years, matching the regional bearish trend of
STI and Asian stock markets.
This Ein55 Personal Indicator has monitored the stock market
regularly since Nov 2011, successfully predicting a golden entry
point to stock market after the US credit crisis in late 2011
with >75% bearish views. This unique investing methodology is
consistent with the famous saying by Warren Buffett: “Be greedy
when others are fearful. Be fearful when others are greedy”, but
in a measurable form of investors emotions.
3
The fearful emotion of investors can be reflected by Volatility
Index (VIX, see Figure 2), higher peak values usually occur when
there are some potential financial crises with high volatility. The
trend of VIX has been declining since the subprime crisis in 2009,
stabilizing within 10-20 points (historical bull markets with low
VIX) most of the time, moving uptrend over last 2 years towards
the critical 20 points. This shows that the global investors have
been worrying over various political or financial events, which
could correct down S&P500 index. Investors may use VIX >20
points (consistently above this level, eg. using moving average of
50 or 200 days) as the first alert to exit, >30 points to enter again.
4
When Optimism level is getting higher (towards 100%), the risk
will be higher with more severe global financial crisis in future.
In this Market Outlook 2020 report, Ein55 LOFTP Analysis
(Level / Optimism / Fundamental / Technical / Personal Analysis)
is applied to evaluate the upside/downside of the markets with
identification of undervalued investment sectors and regions.
The goal is to find a good business, buying below 25% Optimism,
selling above 75% Optimism (see sample chart in Figure 3).
A comprehensive market analysis should always start from
macro level (world, region/country, sector), gradually zoom into
micro level for individual investments (eg. stocks / forex / bonds
/ properties / commodities). Based on World Stock Index (23
developed stock markets) shown in Figure 3, the global stock
market is forming triple tops near to or above the critical 75%
Optimism. In future, when the Ein55 Optimism level falls below
the high-risk zone (75%), downside risk would increase, therefore
current stock market is mainly suitable for trading, not investing.
5
In the last 1 year, comparing the major stock market indices
(see Figure 4) in US, China, Hong Kong, Germany and Singapore,
we can observe a gradual recovery since the stock correction in
late year 2018. Over the past 1 year, US stock market has even
achieved new high historical high (eg. S&P 500 above 3000
points) from time to time. At the same time, the stock market in
the rest of the world is relatively weak, mainly going sideways.
As mentioned in my last year Market Outlook 2018 report,
when global stock market achieves a new record high each time
with high market Optimism, it is safer to position for short term
trading, not for long term investing. Indeed, the reversal in stock
market in 2018, become bearish for the rest of the world (except
US) has shocked the global investors, especially for China stocks
with more than 20% price correction, fulfill technical criteria for
a bear market.
In the subsequent sections, these 5 regional and Singapore
stock markets will be investigated with deeper analysis on
selected topics of interests.
7
3.2 Effect of QE
As predicted in my earlier reports, US stock market has
adjusted well without QE. The Federal Reserve needs to play the
mind game with the market, stopping the massive stimulus plan
at the right time with the help of stronger US economy. However,
larger scale of QE is needed for future global financial crisis
solution. In year 2020, similar episode will be replayed, except
the actor of QE is replaced by US interest rate adjustment.
8
As mentioned in Market Outlook 2019 report, if one believes
in market cycling, mega macroeconomy trend shall repeat itself
sooner or later. US interest rate has been increasing by about 0.5-
1%/year from near-zero position to 2.25-2.5%. In year 2019, there
is a major turning point, US interest rates are cut 3 times to 1.5-
1.75% to sustain the bullish economy. The rate of US interest
rate adjustment and Optimism of global stock market will affect
the duration of bull run. When there is a global financial crisis in
future, there will be little room left to cut down the interest rate,
need to depend mainly on QE (i.e. printing money).
9
saving rate is about 3-5%, implying they will spend or invest
majority of their earning. The funds and spending from US
consumers will help to sustain the economy and stock market.
Therefore, US unemployment rate is an important economic
indicator, mega trend to a lower value is preferred. During the
worst economy year of 2009, it recorded a very high
unemployment rate of 10%. Current US job market is very strong,
unemployment rate is even lower than the last historical low of
4% in economic peak of year 2000, on the way to challenge the
last 50 years low of 3.4% record in year 1969.
10
economy. The critical milestones of unemployment rates (5%,
4.5%, 4%) are reached yearly, projected accurately in my earlier
Market Outlook 2015-2019 reports, which has justified the Fed to
activate the interest rate hike as predicted. The next critical
checkpoint of 3.5% mentioned in Market Outlook 2019 report is
also reached, as predicted, US stock market has achieved new
historical high with very high Optimism level, a significant
hidden risk. The next checkpoint will be 3% in year 2020-2021.
11
3.6 US Bond Market
After excessive QE over the past decade is tapered, the US
government (treasury) bond price has declined from historical
high, while the bond yield which is always opposite in trend,
climbing above 3% in year 2018, currently falling below 2%,
future trend depends on US interest rate and US economy strength.
The first critical limit of 3% mentioned in Market Outlook
2018 report is reached. In year 2019, an abnormal inverted bond
yield graph is triggered for US Treasury, shorter term bond yield
(eg. 3 months or 2 years) is higher than longer term bond yield
(eg. 10 years), resulting in great fear of global financial crisis.
12
Commodity Market
Global commodity market (Commodity Price Index) usually
has positive correlation to the trend of inflation (Consumer Price
Index), higher during the bullish economy, lower during the
bearish economy, due to the relative demand and supply.
Commodity market has far exceeded the 100% Optimism in the
last economy peak of 2007 but the global financial crisis in 2008-
2009 has seriously corrected the prices, trading at very low
Optimism in the last few years based on the trend of last 2 decades,
currently at recovery phase, mixed trend in short term.
Commodity market has been bearish for the past few years,
currently is on the recovery phase as the market fear has gradually
subsided. The commodity market price correction has created
opportunity for investing in stocks. The prices of commodity
stocks are mostly at lower optimism but mixed trend in short term.
However, this opportunity is not aligned with the global stock
markets at moderate high optimism, therefore the commodity
stocks are more suitable for trading in short to medium term, not
for long term investing. Weakening of USD will help the
commodity market to recover at faster rate.
Gold / Silver
Within the commodity market, the precious metal, gold, has
been a favorite investment of choice. However, in the past few
years, gold has been used as a tool for speculation, not really a
hedge against inflation (which has been at low level for US) as its
last historical peak in year 1980. The price and trend of silver
follows gold very closely.
In late 2011, supported by QE2, both gold and silver reached
another historical high over a 30-year market cycle. Since gold
and silver exceeded 75% Optimism of their historical prices, the
13
correction in the later 4 years has been substantial, gold price is
nearly halved while silver price drops to about 1/3 of its peak
price.
Although prices of gold and silver are recovering from
intermediate low, current market is suitable for short term trading
(trend-following strategy to buy high sell higher), not for long
term investing (buy and hold). The super-long market cycle (30
years) of gold and silver forbid any long-term position, especially
for value investors, unless the price drops below 25% Optimism
for gold. Over the last decade, both gold and silver have become
tools for speculation or trading, not yet for long term investing at
the moment.
Crude Oil
Price of crude oil has been following the general downtrend of
commodity market mentioned earlier, in opposite direction of US
Dollar Index.
Brent crude oil price per barrel has been corrected from
US$115 (over 75% Optimism) to US$27 (nearly 0% Optimism),
recovering and stabilizing above US$60 (around 25% Optimism
level) over the past 1 year after 30% dip in price in late year 2018.
This could be light at the end of tunnel for oil & gas crisis stocks,
higher oil price would bring higher revenue and share prices.
Similar to other commodities, current oil & gas stocks are
mainly suitable for trading, supported by recovery of global
economy with stronger demand for crude oil and weakening of
USD at the same time. For crisis investing, only stock with strong
business should be considered as they are more likely to survive
through the winter time and become stronger one day.
14
4. Regional Market Outlook
4.1 Europe Market
Europe market experienced Euro Debt Crisis during 2010-
2011, mainly due to the high national debt with poor
fundamentals of these 5 countries from EU: PIIGS (Portugal,
Italy, Ireland, Greece and Spain), resulting in potential sovereign
defaults. In 2011, this Euro crisis was coupled with US credit
crisis, bringing the global market to a new mid-term low with
correction around 20-25%.
In late 2011, I was one of the few bullish market viewers,
despite majority of the market views were bearish (see earlier
Section 1 on Mass Market Sentiment). Main consideration is that
the global market was at only 50% Optimism, the downside was
limited. Therefore, I determined that the Euro Debt Crisis and
US Credit Crisis were only regional crises, unlikely to evolve into
a global financial crisis. This is similar to the Asian Financial
Crisis in 1997, only limited to a region, but not globally.
European stock market reached a market peak in year 2017
(over 75% Optimism for Germany DAX Index), recovering from
correction in year 2018, aligned with trends in global stock
market. The UK Brexit crisis is not as critical as monitoring of
world and US stock market. Current European stock market is
suitable for short to mid-term trading, not for long term investing.
15
central bank, as well as implementing various cooling measures
for the property market. World No 2 economy, China’s stock
market only had 1 year of bull market after the China QE, then
experienced a bearish market over the last 5 years due to the
restructuring of economy. Fundamentals of China economy has
been good with bullish global economy, but the political economy
is the invisible hand limiting its growth.
As pointed in earlier Market Outlook 2014 report, China SSEC
Stock Index at 2000 points (crossing many times in the past few
years) was near to 25% Optimism, providing a rare opportunity
for new investors. In 2015, China stock market has experienced
a speculative rally, Optimism is surged to the critical 75%
Optimism, 150% gain in China SSEC Stock Index from 2000
points to 5000 points. High market optimism with fear of US-
China trade war has triggered a major correction in China with
Optimism again below 25%. Despite many undervalue stocks,
current China stock market is suitable for short to mid-term
trading, not for long term investing, mainly because global and
US stock market are still at high market optimism with high risks.
16
5. Singapore Market Outlook
5.1 Singapore Stock Market
Singapore stock market has been “sleeping” with STI
oscillating around 3000 points over the past few years. An
investor who invested in Straits Times Index (STI) ETF
(representing 30 blue chips) in the late 2010, will virtually has no
capital gain after holding for 9 years due to cyclic prices.
STI has been stagnant due to lack of local stimulus plans and
slowing down in Singapore economy. In a sideways market, STI
is more suitable for mid-term trading, not for long-term investing,
despite the Optimism has been around 50%±10% most of the time.
In a flat market with sideway trend, stock index or prices are
usually traded in an oscillating manner within a channel. Short to
mid-term swing trading with smaller profit and loss targets, may
fit better for the current stock market in Singapore.
After reaching the last market peak of 3600 points in year 2018
(as predicted in Market Outlook 2018 report, breaking the earlier
peak of 3500 points), STI follows the short term bearish global
stock market trends, dropping about 600 points to an intermediate
low, staying above critical 3000 points (see Figure 7). Business
fundament is not as critical as alignment with world and US stock
market. The Singapore stock market has lost the short-term
uptrend momentum. Current Singapore stock market is more
suitable for short to mid-term trading, not for long term investing.
Singapore is a highly globalized economy with many
international links. This is the reason why Singapore market
usually follows the leads of other major markets, eg. opening by
overnight US market, late morning by Asia, late afternoon by
Europe. Another way to estimate the future of Singapore market
is through the outlook of global or US markets. With global stock
market at high optimism, Singapore stock market will have
17
limited upside, unless there is a drastic change in national
financial policies or strengthening of Singapore economy. There
may be still a last rally in future if US stock market is stable but
this is only suitable for trend-following traders, not for investors.
18
5.2 Singapore Property Market
Singapore property market has been bearish after the 7 rounds
of cooling measures by government since 2011, but price
correction in each quarter is limited, fulfilling the ultimate goal
of government to stabilize the housing price, making it affordable
to new buyers and protecting its value (price) from becoming
negative asset for house owners during crisis time in future. As a
result, the Singapore property market is currently at moderate
Optimism of >50%, a fair value but not suitable for investing yet.
The government introduced 8th round of cooling measure in 2018,
slowing down the pace of recovery but uptrend is intact.
The return from Singapore property market can only be
maximized with leverage and it has been limited due to various
cooling measures. Singapore property stocks have the best of
property (high quality asset) and stock (growth and volatility).
However, the rising interest rate in Singapore will add pressure to
both Singapore property market and related property stocks.
19
Acknowledgements
The author is grateful to educational partners: iFAST, CIMB Securities,
City Index, CMC Markets, Lim & Tan, Phillip Securities, UOB Kay Hian,
Maybank & Kim Eng Securities, KGI, Shareinvestor.com, SIAS, Capitaland,
Investing Note, Share Investment Magazine, Wealth Directions, Cyberquote,
Ein55 graduate and mentors, blog readers and workshop audience for
supporting the Ein55 investing education programs to guide the general public
towards the right path of investment.
Disclaimer
All financial instruments including equity and derivative investment involve risk.
Transacting in financial instruments is inherently risky and uncertain. Past results are
not indicative of future perform. No system or methodology has ever been developed
that can guarantee profits or ensure freedom from losses. The author, SMARTS
Enterprise LLP, Ein55 Pte Ltd and partners shall not be liable to the reader or participant
for any damages, claims, expenses or losses of any kind (whether direct or indirect)
suffered by the reader or participant arising from or in connection with the information
obtained from the publications, newsletters, blog, forum, courses or trainers.
WE
Stock Mkt Property
Shipping
(Index / $) Mkt (HPI)
(BDI)
20
Appendix: Free Investment Courses by Dr Tee
21
Bonus #1 for Reader: FREE Dr Tee Investment Course
23