It’s the end of the 41st week. Only 11 weeks left until the end of the year, and it couldn’t get more exciting. We got the final countdown for the Brexit. The president of the United States is facing a trial of impeachment. Hong Kong turned within a few weeks from an investor’s paradise to the most public and persistent resistance in China. A little girl is speaking up to leaders worldwide and shaming them into their negligence to the climate crisis.
There are so many things happening everywhere, it’s hard to imagine the world could get even more complicated. We got everything. We got hope. We got threats. We got fights. Dramas. Politics. The whole package.
The stock market reflects investors expectations on the future
I was once told that the stock market was mostly a reflection of our economy. I am not the only one anymore who doesn’t believe that this is accurate. Rather I believe that the stock market reflects the expectations of investors. It’s not a real-time reflection of the world economy as it is. It is what investors, people, believe a company (or many companies hence the market) to be and/or to become.
Therefore, when stock markets start to go down and speakers on the news start talking about a recession, it doesn’t mean that things are bad. It means however that people believe things to be or to get bad. They can be right. They can be wrong. As it’s often the case, things tend to happen if only enough people believe in something. And investors play a crucial role here. Because since they are the ones who put money in the markets and control those huge cashflows, they clearly have the power to steer things into certain directions.
In the long-run, however, the truth will out. Because no matter how much anyone would try to trash-talk a company or even an entire market, once the annual earning reports are published and numbers are confirmed, then there is not much left to dispute. This also works the other way round. You can talk-up a company as much as you want. If the numbers disappoint year after year, then the share price will react to this sooner or later.
After rain there is sunshine
So where do we go from here? The world is in tumult and any day now could cause havoc in the markets. We have very high volatility, which means that stocks seem to act not rational and very sensitive to either good or bad news. But looking at the long game, I don’t see reasons to worry just yet. In fact, I am pretty confident that unless something really crazy happens, this year will end so much better than 2018 did.
Stocks from my portfolio that I expect to outperform are Apple (AAPL), The Trade Desk (TTD), AbbVie (ABBV), GlaxoSmithKline (GSK), Imperial Brands (IMBBF), HSBC and Vodafone (VOD).
The US stocks from the mentioned above will present good numbers and solid growth. But the UK stock prices will simply benefit from a rising Pound. As the Brexit saga is coming to an end, the British currency is set to thrive no matter the outcome. Because while people might be scared about what will happen, the only thing investors really worry about is uncertainty. Once we know what’s going on, we will know how we have to position ourselves.
I feel good times are coming.
Disclosure: I own all stocks mentioned in this article.