Money can still be made during bear market slump
Even as the market yesterday dipped its toe into official bear territory, there’s still money to be made.
Equities may be falling out of favour but currencies, commodities and good old-fashioned cash are still in demand as investments likely to weather the current financial storm.
“Depending on your time scale, banking stocks look cheap if you have a view over the next three to five years.
But if you have a shorter view, say six months, then avoid them like the plague and invest in companies undervalued by the market but not affected by the credit crunch,” said Jane Coffey, head of equities at Royal London Asset Management.
Paul Mumford, senior fund manager at Cavendish Asset Manager added: “I go for quality companies with visible earnings that will recover when the whole market does. They key is not trying to be too clever as the market could turn suddenly and you don’t want to be caught out.”
However, some City brokers are having a field day in the current market.
“Volatility has been brilliant for us, people forget you can make money by shorting. Exchange trader fund securities are also proving popular with the more sophisticated clients,” one trader told CityA.M.
Analyst Views: Can you make money in a bear market?
Mick Gilligan (Director of fund research at Killik & Co): It’s still difficult in the short-term but there are niche investments to be made, such as soft commodities, gold-related stocks and funds, and hedge funds which specialise in benefiting from difficult times. However, financial institutions are sitting on a lot of cash so any economic data that comes out better than expected could result in a sharp reversal of the market.
Henk Potts (Equity Strategist, Barclays Wealth): Short term volatility creates long term opportunities. Now is the time to take advantage of cheap stocks. We believe banking has been oversold and we like ones that have exposure to Asia. Also we are quite bullish in material stocks and telecoms, which continues to provide a strong, stable revenues with less tough regulation and emerging market growth.
Justin Urquhart-Stewart (Seven Investment Management): Not all assets are headed downhill. Money can be made on currency speculation – I’ve been buying US dollars. Timber and infrastructure are buoyant, particularly in emerging markets. Selling short on oil is an option is the slowdown puts pressure on commodities. There’s as nothing wrong with cold hard cash, especially as you can get some great interest rates at the moment.