Please find below the 5 charts that tell interesting stories on Markets and Investing.

 

1) Israel-Iran War Crisis and Equity Markets:

 

Recent geopolitical tensions have caused volatility in the equity market.

 

Historically, equity markets don't see huge drawdowns after crises, and recoveries are quick.

 

• The US S&P 500 typically falls by -2% on the first day of a major conflict.
• The total average drawdown for these events is -8.2%, with full recovery generally occurring within 1 to 2 months.
• An important factor to watch is whether the war breaks out during a recession.
• If not in a recession, the average 12-month return is +9.2%.
• If in a recession, the average 12-month return is -11.5%.

 

 

2) Chinese Govt Stimulus and Market Euphoria:

 

Last week, the Chinese Government announced a stimulus package worth USD 1.07 trillion (6% of China's GDP) to revive the real estate sector, boost consumption, and support capital markets.

 

• In response, the Chinese equity market surged approximately 30% over the past 10 days.
• The big debate now is whether this rally will last and if its a good time to invest in the Chinese market.
• Chinese markets are currently trading at an attractive valuation, with a low PE ratio of approximately 14, making it a potential value investment with a 5-10 year time horizon.
• However, investing in China carries significant risks, including the possibility of a Taiwan conflict, unpredictable actions by Xi Jinping and slowing GDP growth & corporate earnings.

 

 

3) Is the Indian Equity Market in a Bubble? Is it a Good Time to Exit?

 

The Nifty is currently trading at a PE ratio of 23.7 and a 1 Year Forward PE ratio of 21, close to the long-term average.

 

• The market rally in Nifty has been supported by corporate earnings growth.
• However, there appears to be a bubble in Mid, Small, Micro, and SME sectors.
• If you are concerned about market valuations, consider increasing your allocation to Large Caps.
• This isn't the level to exit the market.

 

*Source : Ambit

4) US Fed Rate Cut and Stock Market Movement:

 

Historical analysis of US equity performance post-rate cuts (since 1970) shows the following trends:

• First Month - Expect high volatility.
• Short-Term - Generally stable unless a major event, like 2007, occurs.
• Long-Term - Typically strong returns over 1, 2, and 5 years.
• Recession Impact - Returns struggle if followed by a deep recession.
• No Recession - Markets often gain over 100% in 5 years.
• Small Caps - Tend to outperform large caps.

 

 

5) Futures and Options Trading: A Gambling Casino for Individuals:

 

Recently, SEBI published a study on Futures and Options Trading, revealing the following key insights:

• Retail traders experienced a cumulative loss of approximately Rs. 1.8 Lacs Crores over the financial years FY22-24.
• 93% of retail traders lost money in Futures and Options Trading.
• Low-income traders and male traders suffered relatively higher losses.

 

Suggestion: Steer clear of Futures and Options Trading.

 

 

Investor Guidance: At current levels, it is prudent to invest only that money in equity which is not required for next 5-7 years. 

 

Disclaimer:  The perspectives provided reflect our expectations of the economy, market, and investments, which may or may not materialize. Investors are encouraged to conduct their own due diligence before investing.

 

Read more similar articles in our blog - https://alphacapital.in/blog/

 

Best Regards

 

 

Dr. Mukesh Jindal CFA, CFP, CAIA, Ph.D.

Alpha Research