Dealing with volatility in the Year of the Rooster

The year started on an upbeat note with indicators showing signs of sustained growth globally, albeit at a moderate rate.

Mr Anthony Raza, head of multi-asset strategy at UOB Asset Management, said: "This may in turn lead to reflation, which is the return of inflation to normal target levels, after the past seven years of low or even negative levels of inflation.

"Reflation also implies that wages may begin to rise with increasing consumption. Further, following the US Federal Reserve's interest rate increase in December last year, we can expect global interest rates to rise gradually, which also signals the recovery in the economy.

Yet financial experts are unanimous in saying that volatility will continue to reign this year.

Veteran investor Gabriel Yap, the executive chairman of investment firm GCP Global, says the uncertainty will centre on how fast interest rates will increase at each United States Federal Reserve meeting.

"Will we indeed get three interest rates increases, what shape the yield curve would take and would be the ultimate absolute increase at the end of the cycle," he adds.

He advises that resourcefulness in finding winning stocks and instruments will underpin the big winners. Economic events can unfold quickly and investors can benefit through a firm understanding of highly correlated investments that latch on such events, adds Mr Yap.

Mr Vasu Menon, OCBC Bank's senior investment strategist, advises retail investors to get ready for unusual uncertainty and volatility this year.

Yet these exceptional movements can also throw up opportunities.

"Investors can rise above the uncertainty and manage market risk by diversifying across asset classes and over time by dollar-cost averaging. As we expect the Rooster year to be more volatile than the Monkey year, it is especially important for investors to stay diversified," he says.

Mr Joey Yap, founder and chief consultant of Joey Yap Consulting Group, adds: "Market volatility will continue to be a factor so investors should be prepared to either profit from volatility or hold through the upheaval."

Mr Jason Low, equity strategist at DBS's chief investment office, said tongue-in-cheek that as roosters are known to be observant, hardworking and impatient, investors will need to work hard, be vigilant and patient in order to have something to crow about at the end of year.

lornatan@sph.com.sg

This article was first published on Jan 22, 2017.
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