“In my view, the crisis really started on September 15 when Lehman was allowed to collapse, and ever since then financial markets have gone into a tailspin, economies have fallen off a cliff. I think the full impact of that crisis is only starting to rear its ugly head,” he says.
Trading sentiment is likely to be further dampened by a slew of gloomy economic data. Japan's economy shrank an annualized 12.1 percent in the last 3 months of 2008, the sharpest contraction since 1974. Other advanced economies such as the U.S. and the UK are also knee-deep in recession with little signs of a rebound.
“I also worry about the European economies, they are really, really stretched, the UK for example. So when we start seeing sovereign downgrades in Europe, that could start spreading to other parts of the world, and that is something to really worry about, because it is the governments of the world that are keeping things alive right now,” Menon warns.
But there is still money to be made even in the most trying of times. Menon has two pieces of advice for investors, one for those who with a short-term perspective and another for those with a long-term outlook.
“There are still short-term opportunities in the currency markets, in the bond markets, even in the equity markets. When you have deeply oversold situations, there are opportunities to buy. I think the key thing is … to be very disciplined, get out when you are making 15, 20 percent and have very strict stop-loss levels,” he explains.
“If I am looking to dollar-cost average or participate in a bigger way in equity markets for the long haul, then I will probably wait six months down the road. Let a couple of quarters pass, let the economic data pan out … and you could see better buying opportunities given a long-term investor.”
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