The sharp fall across equities, gold and silver has created an unusual situation. All asset classes with the exception of debt displayed weak trends making the situation difficult to ignore. There seems to be nowhere to hide. The complete absence of investor confidence, the continuing selling spree across equities and constant drumming up of negativity are all telling us something. Hardly any contrarians remain confident of a relief rally. War mongering in the Middle East and rising oil prices are further impacting investor sentiment.
Everyone is second-guessing what others will do in this market. The investment actions of others, emerging investor sentiment and dimming investor confidence are weighing on the minds of even the proverbial bulls of our market. The hurry to buy the dip is gone, replaced by a feeling that stocks will get cheaper anyway. The lack of buyers is only taking down stock prices on low delivery volumes and thin trading. Did we even expect this to happen just a few weeks ago?
Weeks ago investors were anxious to buy fancied stocks in hot themes at any valuation, believing the stocks would trade higher after the quarter’s results were released. The very same stocks are trading lower and weak even before the results are out. With no hurry to buy this dip, the complete absence of investment anxiety and a rising belief that stocks would anyway be available cheaper going forward, there is an absolute absence of buying interest. This seems like the perfect setting for the patient investor.
There is an opportunity to buy whatever we want. Prices are turning in our favour, and valuations seem attractive in the companies we really want to own. Investors should rise above the weak sentiment and invest where they were waiting to. When valuations are favorable, making the most of the opportunity makes the best sense. We can build positions with little or no impact cost, buy at favorable valuations, and build a margin of safety in our portfolios. It’s been a long while since we experienced that setting.
