2016 is the year of the Fire Monkey, which, according to Chinese astrology experts, represents volatility, chaos and mischief. Coincidentally, the characteristics of the Fire Monkey are synonymous with the major problems financial expert Dawn J. Bennett forecasts for the remainder of the year in the equity markets: volatility.
This year is set to be the most volatile year since 1938, and investors need to be well aware and prepared, Bennett says.
According to Bennett, “One thing to be particularly aware of is the so-called ‘blackout period’ that will be beginning soon. Companies tend to stop or sharply reduce buybacks during the first month following the end of a quarter, as earnings are tallied and reported. Especially in a market where nearly everyone else is selling due to macro fears and concerns about oil and China, this blackout period can have an amplified effect on volatility.”
She continued, “Liquidity is increasingly scarce, looming large as junk bond liquidation problems present the leading edge of a rapidly approaching wave, a harbinger of the bursting of the asset bubble that central banks have been artificially inflating since 2008 and 2009. It seems as if we are truly returning to the scene of the crime, but the damage that threatens will be far, far worse this time around.”
Not to mention, the Federal Reserve still has no clue what’s going on or what to do. The National Archives recently released the records of the Financial Crisis Inquiry Commission that was created in 2009 to investigate the 2008 crisis. The records, which include meeting minutes, routine business and extensive interviews of key players, show that everyone was puzzled by what caused the crisis and how it could have been prevented. Today, the situation is no better, and if anything, it’s worse, Bennett says.
Bennett recommends Americans be ready for the Fire Monkey and the volatility and mischief that lies ahead. Diversify your wealth and think for yourselves, she advises.