The nation’s stock market and, indeed, the economy, has over the past 22 months has mostly been bearish, besides favouring high yield-sensitive sectors over the real sectors that drive economic growth.
Evidence of this is the national productivity that has for almost 13 quarters struggled with a slower-than-expected GDP growth rate, with undulating movement resulting from geopolitical uncertainties and inconsistent economic policies.
The situation has been made worse by the high cost of funds which has limited private sector access to liquidity needed to boost economic activities for driving national growth and oil macroeconomic progress and prosperity.
Every in the world today, stock markets are a leading indicator of what is happening, just as at the same time they foretell what is about to happen.
The case of the Nigerian stock market is not different. As early as almost six years ago in earlier in 2014 and 2015, the benchmark All-Share index of the Nigerian Stock Exchange (NSE) has betrayed signs of a weak economy with its dominant bearish posture long before the economy finally slipped into recession in 2016. The economic recession came after three consecutive years of negative close by the NSEASI, just as other macroeconomic indicators during the period were negative. It reflected a lack of consumer and investor confidence, with the Naira exchanging for as high as N520 against the U.S Dollar, the GDP was in negative and inflation was ballooned, resulting to imported inflation due to high exchange rate.
To check the situation, recall that the Central Bank of Nigeria, through a bouquet of new policies, intervened in the exchange rate market, introducing the exporters and investors window to provide funds for eligible imports. This was after 41 goods were barred from access to the official foreign exchange window, a situation that boosted manufacturing sector activities and earnings capacity.
The I&E forex exchange window initiative was of great help, as it mitigated the losses that wiped away company profits in the 2016 financial year, as seen in the seeming improved corporate earnings of listed companies in 2017.
According to Godwin Emefiele, governor of the Central Bank of Nigeria (CBN) on Friday in Lagos, the I&E window has recorded over $60bn worth of transaction since its inception in April 2017. This has helped to sustain the economic recovery while supporting stock prices in addition to attracting smart money into the market.
Closing their two-day meeting on Tuesday, all 11 members of the CBN’s Monetary Policy Committee (MPC), had in line with the expectations of Investdata Research and other analysts, unanimously voted to retain the benchmark Monetary Policy Rate (MPR) at 13.5%, among others. One reason for the decision to hold rates by the MPC was the spike in inflation rate for the second consecutive month to 11.61% from 11.24% in September, due to a combination of the Federal Government’s closure of Nigeria’s land borders; and poor harvest season, among others.
The committee opted to observe the impact of various unconventional policies and directives of the CBN, for deciding what its next policy option would be.
We note also that this cocktail of policies has helped to trigger national productivity as revealed by the recently released Q3 GDP rate, which grew at 2.28% (READ MORE).
The decision of the MPC to leave the various instruments unchanged was also to protect the nation’s external reserve, as any form of adjustment down may trigger selloffs by foreign portfolio investors in any of the windows which may further exert pressure on an already declining reserves. The oil price oscillation and the future oil market have made the MPC call for a review of the 2020 budget oil benchmark price to $57 per barrel in order to build a fiscal buffer to stimulate the economy.
The usual seasonal demand boost in the fourth quarter could push growth up to 2.48% or so this year. The other drivers are a small rise in crude output and the proposed adjustment of the national budget cycle to January- December calendar year to enhance planning. The CBN policies and directives seem to be addressing age-long problems that have constituted major impediments to economic growth.
The weak economic growth and this prolonged bear market are coming to an end, here is what to do and when. Nothing lasts forever, including the bear or bull markets.
The ongoing market correction remains the longest in the recent bear market and would definitely come to an end. Everyone knows that already, but those who have tried to predict when that end would come have obviously been proven wrong. There are lots of studies that say investors can’t time the market, meaning you can’t be a successful investor if you jump in and out of the market every time you think it’s turning down or up again.
So, here is how to tell if this bear market is ending, when it has actually ended, and most importantly what to do to recover your losses and grow capital by making a fortune when the bulls go crazy.
Market Timing Is Everything
Timing the market, to me, is about knowing when bears are exiting and riding bulls’ markets, recognizing when they are ended. This broad-based timing has made discerning investors and traders wealthy. The most successful and richest traders and investors in history time the markets, like we do at Investdata, especially during the annual investment summit and which we are poised to undertake at the forthcoming INVEST 2020 Summit.
And yes, you can include Warren Buffett in the list of successful billionaire market timers, along with George Soros, Carl Icahn, Steve Cohen, David Tepper, Michael Steinhardt, Paul Tudor Jones, Sir John Templeton, the list goes on. If you don’t know Warren Buffet engages in market timing and trades, then there are things you do not know him.
Success in investment timing involves weeks, months and even years of painstaking research.
Think of good timing in terms of a calendar. Timing in terms of days and weeks is for traders. Think of that kind of timing like clockwork.
Not that there is no money to be made trading short-term. Surely, there is, and we have done that for years. It is just not for everyone, because most people do not have the time to trade for a living like successful traders who make millions every year from trading.
Smart investors make extraordinary gains in bull markets because bull markets can last a long time, depending on the factors driving the market.
Every bull and bear market is unique. What is important is knowing when they are beginning and ending. The positive end of November is signal that the regulatory directive of the CBN, Securities and Exchange Commission, and the Nigerian Stock Exchange are shaping the market with investors buying interest and positive sentiments continue to look up. Note that, high cap equities and a few blue chips price movements have been sluggish, arising from the new price methodology introduced, which re-adjusted volume allowed to move prices.
On the strength of the above, we believe that playing listed equities of choice by their respective trends is an intelligent trading strategy at the moment. Also observed is the fact that equities selling below N1.00 are now highly volatile since the low fund is required to move their prices. Few traders are believed to be enjoying short-term capital appreciation through these listed equities.
One major attraction to the equities market at the moment is the recent drop on the 364-day Treasury bill yield which has trended around 10% over the past week, in other words, funds seeking higher returns are currently finding their ways into the equities market not minding the higher risk.
The market at this point of recovery is likely to experience up and down movement but investors should not panic out of position, rather we recommend that traders should take timely advantage of low prices around the market to accumulate. The expected December rally was projected on the fact that Nigerian Equities Market has more than three years record of Santa Claus rally supported by year-end portfolio balancing and window dressing.