The S&P/ASX 200 (ASX: XJO) trended lower over the week, falling 0.9%, while all three US indices shared a similar fate.
The Nasdaq tumbled 2.3% and S&P 500 dropped 1.4% while the Dow Jones was more resilient, falling 1.1% as many constituents fall into the ‘value’ camp.
As per usual, here are my three key investor takeaways from the week.
Short-term focus never greater
From the position of writing a daily column, my first takeaway may seem counterintuitive, however, having been involved in markets for close to two decades, it is evident that daily news flow is driving markets more than ever.
Whether it is the ease of access to information from sources like Twitter (NYSE: TWTR), or the ‘fear of missing out’ factor that is driving everything from IPOs to crypto, investors must be wary of getting caught up in the short-term noise.
Thankfully, short-termism opens up greater opportunities for patient and informed investors.
Searching for quality
Speaking with a number of professional investors last week, ‘quality’ has been a clear focus in their stock selection process.
Expanding on the first point, they noted that short-term price momentum and speculation has been a clear driver of the volatility and huge ‘rotations’ we are seeing from defensives to cyclicals to growth stocks.
The quality of companies coming to market has been falling and in some cases, particularly for those digital COVID winners, ranging from Kogan.com Ltd (ASX: KGN) to Redbubble Ltd (ASX: RBL), Adore Beauty Group Ltd (ASX: ABY) and Nuix Ltd (ASX: NXL), valuations are being driven by an extrapolation of extraordinary short-term results.
Betting against the Fed
Finally, it appears that investors are now betting against the Federal Reserve, with traders positioning for a faster than expected increase in interest rates despite multiple confirmations of the opposite.
From a personal perspective, it seems that the fantastic headline economic figures are not reflecting the pain that remains throughout the private sector, particularly for small businesses, and this is clearly the reason that governments and central banks will remain supportive.
