Putting it mildly, last week was an anti-climax. We had already planned the victory party all the way to Christmas and stood champagne in hand when Super Mario appeared on screen.
The European Central Bank ‘did’ add to the Quantitative Easing programme. However, while the market was expecting a murtal beraq tas sitta, the ECB delivered a sufarell.
And it hurt! It hurt in several ways. Primarily it hurt because on the day, and the days that followed, equity markets lost seven per cent. Seven hard earned per cent. Up to last week I was sitting pretty on a significant pile of gains. Gains that could have been protected, but instead we were more aggressive as Super Mario repeatedly led us to believe that the ECB would provide support.
It also hurt because suddenly our perfect plan which had clarity going into 2016 suddenly has no basis. And I cannot seem to find were I put Plan B. The ECB has also created a dilemma for financial by tempering with its own credibility.
I can honestly claim that I was aware that valuations in financial markets were tight. However, signals from the Central Banks repeatedly indicated that the monetary authority was ready to accommodate further expansion. I also cannot recall a single financial analyst that did not expect the ECB to deliver. It seems that everyone got it wrong.
Panic is definitely an investor’s worst enemy and now that I have accepted that my supernormal profit strategy has failed, it is time to move on. In the short-term above normal cash levels should provide some protection against further surprises, plus some liquidity for Christmas shopping.
In the meantime, between some drinks and a party, I will think about how to generate the best return next year. Even with this turn of events, 2015 was an acceptable year. Definitely off the list for 2016 would be to rely on the ECB for a special Christmas bonus.
Disclaimer: This article was issued by Antoine Briffa, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri & Co. Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.