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Sell Now to Deep Regret or Keep Calm and Carry On

 

treasuries sell off

  • Predictably, Europe’s banking stocks were hit hard on Monday, sinking to their lowest in two months, after the U.S. and European Union kicked Russia off the international SWIFT transaction messaging system and moved to target the central bank’s foreign exchange reserves.
  • In the face of an increasingly chaotic geopolitical environment, JPMorgan Chase’s head of global equity strategy Mislav Matejka is advising investors to avoid panic selling, to focus on the market’s fundamentals instead.
     

It’s a common adage that investors often trade too much, to their own detriment, often chasing up assets as their prices are rising, panicking as their prices fall and selling near the low, only to crystalize those losses and handing over opportunities to the savvy “smart money.”

Hence the saying, bulls make money, bears make money, pigs get slaughtered.

But why pigs? Because they’ll eat anything that’s in front of them (allegedly) – and many retail investors fall into that category because they’ll lap up a hot stock tip and sell on fear just like a pig will chow down on whatever’s in the slop trough, even bacon.

And which is why in the face of an increasingly chaotic geopolitical environment, JPMorgan Chase’s head of global equity strategy Mislav Matejka is advising investors to avoid panic selling, to focus on the market’s fundamentals instead.

In a note to clients on Monday, Matejka wrote,

“If one is selling on the back of the latest geopolitical developments now, the risk is of getting whipsawed. Historically, vast majority of military conflicts, especially if localized, did not tend to hurt investor confidence for too long, and would end up as buying opportunities.”

Is this time different? It’s harder to say, especially because the world hasn’t had to face off with an autocrat armed with nuclear weapons that may (or may not?) actually use them and risk converting the entire European continent into a post-apocalyptic wasteland.

But what about North Korea?

That consideration matrix is considerably different – Kim Jong Un and his band are not in active conventional conflict with South Korea, Russia’s Vladimir Putin is, and it’s not going well.

What ought to have been a brief outing to Kiev has since seen Russian forces pinned down, demoralized, and undersupplied.

Matejka’s appeal for investor calm comes as a fresh wave of Western sanctions ordered against Russia are starting to hit home and hard, while Putin has grown increasingly belligerent, ordering his nuclear forces to be on alert.

Predictably, Europe’s banking stocks were hit hard on Monday, sinking to their lowest in two months, after the U.S. and European Union kicked Russia off the international SWIFT transaction messaging system and moved to target the central bank’s foreign exchange reserves.

Marejka isn’t the only one suggesting that investors stay calm, UBS Global Wealth Management echoed the sentiment with a note by strategists led by Mark Haefele on Monday,

“We think it is important that investors maintain a calm stance and keep a long-term perspective.”

Haefele and his colleagues have advised investors to diversify across regions, sectors, and asset classes, use commodities as a geopolitical hedge, and position for U.S. dollar strength.  

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