Volatile market #investments
To say the London stock market is a volatile market would be an understatement. Next week’s referendum has not only caused uncertainty it has caused panic. What can small investors do?
Many economists are predicting a fall in the value of the pound if the decision is to leave the EU, possibly by as much as 30%. However, the decision won’t have immediate effect and so the pain could be drawn out with a prolonged depreciation of the pound against some currencies. Protecting against that could mean perhaps buying another currency or buying US stocks. The ECB has a quantitative easing programme in place until next March and so buying the Euro doesn’t seem like a good idea. The flee to safety does seem to be across the Atlantic, but I suspect mostly to the bond market.
What if we stay in?
The polls and more importantly the betting seems to suggest that we will stay in the EU. That could give the FTSE 100 index a boost by as much as 20%. One factor no ones seems to be taking into account is automatic trades. Many trades are done on a trend. If the vote is to stay in, the trend will be upwards across the market and so automatic trades will kick in and a rush of buying could ensue. That in itself will be another trend and so it goes on. It could be a good strategy to buy now or perhaps wait until next Wednesday.
Banks such as Lloyds and Barclays seem to be the hardest hit and so they could be a good investment if you believe the vote will be to remain.
Money from a volatile market
There are lots of opportunities to make money. Nissin bought a stake in Premier Foods for 65p a share a few months ago and today you can pick those up for just 41p a share. Shares in Premier Foods were 186 when the company had massive debts. The debts have been reduced and many problems solved and the company is back in profit. Tesco looks like a bargain too with the restructuring continuing. Dobbies has just been sold for 217 million. If Tesco concentrates on their core business and avoids grandiose schemes they will do much better. I’ve noticed that staff training has included being nice and helpful to customers. I shop there quite often now.
In a volatile market, gold seems a safe bet but maybe not this time. If sterling does plunge 30% then gold would appreciate, but on balance US stocks might give a better return.
That is all for this week.