Flash Alert

Dear Fellow Investors, 

Who will blink first the fierce Russian woman or the bear?

A Brief Reminder:

Don’t Chase Tempting Rallies

US Stock prices rallied an amazing 21% over the last three days. All world markets enjoyed a strong bounce including the KLSE and SGX. The bounce was enough to pull the Dow out of 11 days in a bear market and spread some welcome cheer all over the world.

The rally gave many investors hope that the Covid-19 pandemic is in decline and the world economy will slowly get back to normal.

Unfortunately, the positive news about the pandemic is based more on hope than reality. Covid-19 infections are continuing to increase nearly everywhere – and so are its deaths. It is way too soon to predict with any certainly that the tide has turned in the fight against the virus.

Market history also predicts that further stock market plunges are on the way. Sharp – but brief – rebounds within major downtrends are common. Most of them are traps for investors who jump back into the market only to see it plunge again. The early birds end up feeling like cooked geese when their new losses are added to those they suffered when the crash started earlier.

The safest way to avoid being lured into one of Mother Market's rally traps is to only buy deeply discounted blue-chip dividend stocks on days when stocks are sinking. Stay safely in cash or gold during rallies.

There will come a day when the Covid-19 emergency will really be coming to an end – and a broad recovery will finally get started. That will be time to do some last-minute buying. However, I don't think we are there yet.

That's all for today.

Bill.