Can markets remain bullish amid growing uncertainty?
The year so far has been full of surprises. Geopolitical events in the United States, United Kingdom and the European Union, as well as the two rate hikes by the US Federal Reserve, have heightened uncertainty.
Despite global developments, the Singapore market has been in a bullish trend since the start of the year, gaining about 9 per cent compared with last year’s average price movement.
Notwithstanding market jitters over the inauguration of US President Donald Trump, the Brexit negotiations and the elections in France and Germany, US equities are relatively buoyant.
The benchmark Dow Jones and S&P 500 indices have notched gains and the Straits Times Index has also picked up, breaking the psychological resistance level of 3,200.
Challenges loom, however, as the US administration struggles to implement a new tax plan and a new healthcare Bill, and to deliver Mr Trump’s pledge of “America First”. Other global factors that could affect the markets include rising tension between North Korea and the US. With Beijing oscillating over the growing crisis with Pyongyang, investors may want to watch out for possible collaboration among the big players.
Back home, the economy is still struggling to get back on the bullish side. Consumer prices are climbing, and investor confidence in the market is building.
However, non-oil domestic exports have been on a sideway trend, struggling to remain on the expansion side. While the economy has been growing this year, recovering losses from last year, growth has not fully stabilised. Relations between China and the US are a bellwether for the Singapore economy.
For the second half of the year, investors should look out for major events that can trigger market volatility.
In the US, the Fed has been raising interest rates at the end of the year for the past two years, and the probability of another hike in December is reasonably high.
Further developments between North Korea and the major powers will influence the balance of power.
To sum up, the local market is picking up momentum, hanging above 3,000 since the start of the year. However, investors may want to keep an eye on the oil and gas sector for the second half of the year, as the Organisation of the Petroleum Exporting Countries (Opec) debates whether to extend output reductions.
With five-and-a-half months left on the calendar, investors should watch out for events such as the German federal election, the Opec meetings, and the US Federal Open Market Committee meeting in December for potential trading opportunities.
ABOUT THE AUTHOR: Yin Thu Tun is a dealer for Phillip Futures