In 2015, the Nikkei 225 dropped 13.8% from 20,563 points on 29 May to 17,725 points on 2 October, while the ASX 200 dropped 12.8% from 5,777 points on 29 May to 5,040 points on 4 September. In 2016, the Nikkei 225 index dropped 14.9% from 17,572 points on 22 April to 14,952 points on 24 June, triggered by weaker than expected economic growth. both triggered by a stalling China economy.
June 2016 Brexit took place
November 2016 Trump took office
Macro factors impact stock prices and are usually out of the investor’s or company’s control.
The only way to mitigate such risk is to invest in businesses that add real value to consumers which should be resilient on three fronts:
1) Businesses that adds real value and are un-substitutable to the consumers: During periods of uncertainties, such businesses shine ever brighter as consumer decreases unnecessary spending or switches from spending a premium at competitors to such companies.
2) Companies that have a growth strategy outside of their domestic markets. Where domestic markets are impacted, this will not stop their ability to grow despite crises. While their peers stall and try to fix and save what they have in the domestic market, these companies continue to grow and expand hence growing stronger with each downturn.
3) Small-mid caps companies that are unheard of. These companies are less covered by fund houses, and so are often undervalued or fairly valued. Silently improving operating income and trading at a significant discount to their peers.