Donald Trump has done it again, it seems. A few days ago on 5 May, the President of the United States announced his intention to raise tariffs on billions of dollar worth of Chinese goods, as well as slap on new taxes on billions more. The new tariffs, which would cover almost all of China’s imports into the US, comes days before Beijing’s trade delegation’s arrival in Washington, and is suspected to be a move calculated to pressure China to reach a quick and decisive agreement.
Stock markets in Asia sold off on the news, and Singapore was not spared either, with the Straits Times Index (SGX: ^STI) down 3% on 6 May. The fact that China is still willing to send a delegation to the US helped to mitigate some of the negative impact, but uncertainty over whether a deal can be hammered out continues to linger. Should investors sell out and wait for things to settle down before buying back again?
The future is impossible to predict
Investors need to know that economic events are almost impossible to predict with accuracy and consistency. This means that such unexpected “shocks” will continue to appear with some regularity, and forms a normal part of a functioning capitalist economy. Stock markets will react to any negative surprise by selling off, and this is also a normal reaction and should not cause investors to panic and bail out.
Get a grip on your emotions
It is natural to feel scared, worried and fearful when there is uncertainty and share prices are crashing all around you. However, it is important to get a grip on your emotions to ensure that one does not end up acting in haste and performing an action which will cause regret in future. Selling great companies in a flurry probably qualifies as an action which will make one experience significant regret, as such companies may not remain cheap for long for the investor to be able to buy them back.
Focus on the business instead of the share price
Investors should keep an eye on the business behind the share price, rather than being fixated with the share price itself. Over the long-term, it is business growth and success which determines the trajectory of the share price, and valuable companies would naturally see their share prices heading northward.
In fact, during times of market turmoil, an astute investor who understands the fundamentals driving the company can take advantage of other investors’ panicked reactions to accumulate more shares. Such sharp sell downs do, in fact, create good opportunities for investors who wish to load up on companies they have been eyeing in their watch list or to average down on existing positions.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.