• 
• 

To recap, I have mentioned in my previous article that the Fed may hold its policy rate from now on, reflecting the end of an easing cycle.

Additionally, US financial markets could proactively react by the third quarter, three months before the real show of a recovery takes the stage.

The much-feared stagflation should not overly concern investors.

My personal reasons are that in the current digital age, economies can withstand challenges much better than in the past.

Secondly, the proactive stance of the Fed will diminish the potential impact from the threat of stagflation.

Technically, the trading game, be it financial or non-financial products, nowadays has shifted from relying heavily on the judgement of human traders to "system" trading, using state-of-the-art mathematical and statistical programme.

These calculations instruct human beings to perform their commands.

This kind of behaviour has a major impact on the movement of underlying prices, as we can witness from the volatile price movement in the current trading world.

Combining the above, I would predict there will be a profit-taking bout in commodities such as crude oil and gold.

Subsequently, investors will gradually build up their positions in stocks and foreign exchange.

Periodically, there will be "parking" positions in bonds.

If I were your fund manager, I would suggest that:

1 You gradually collect a basket of good, cheap stocks. After you have seen a clearer picture, you may then trade the market, such as using index trading.

2 You start reducing the weight previously put in high-yield assets, especially the Kiwi or New Zealand dollar. If you have not entered into it before, don't go now.

Fundamentally, the New Zealand economy has shown clear signs of a slowdown. Hence, markets now expect the Reserve Bank of New Zealand to end its hiking cycle, ushering in a good chance of lower interest rates.

3 You "unwind" your bond holdings. You may park your cash in popular bank debentures offering what look like high interest rates. If you wish, please go for shorter periods rather than long ones.

I do believe the bull is coming back.

It is a simple rule from Trading 101: Take profit, hold cash and buy assets considered inexpensive.