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Today's big stories

The tech-focused Nasdaq index collapsed into a “correction”, but investors have been quick to take advantage
There's a simple checklist you can use to make sure you don't fall foul of your instincts – Read Now
The OECD upped its forecast for global economic growth, thanks to the latest US economic support plan

Quick Fix

What’s Going On Here?

The Nasdaq Composite index fell into a technical “correction” on Monday, but investors had glossed over the hiccup just a day later.

What Does This Mean?

The tech-heavy Nasdaq rose 11% from the start of the year to hit its highest level ever by mid-February. But after weeks of poor performance, the index finally collapsed more than 10% from that peak on Monday – sending it into official correction territory. There’s nothing special about that in and of itself: it’d be far more worrying if there’d been a 20% drop, which would throw the Nasdaq into a “bear market”. But it does say a lot about how investors are behaving: the collapse was partly down to their long-anticipated rotation away from high-growth tech stocks in favor of economically sensitive “cyclical” and cheap-looking “value” stocks.

Why Should I Care?

For markets: Investors are buying the dip.
With the world focused on getting back to normal this year, companies whose earnings are closely tied to economic growth – think carmakers and construction firms – stand to benefit the most. Meanwhile, those whose earnings continue to grow no matter what – like the tech giants – will probably benefit the least. Still, investors were quick to “buy the dip” after the Nasdaq’s correction on Tuesday, initially sending the index straight back up 4% – so maybe the rotation analysts have been expecting in the States isn’t as straightforward as they thought.

Zooming out: The rotation is a-go in Asia.
At least the rotation is playing out exactly as predicted in Singapore: the country’s key stock market index is up 9% this year, flipping it from Asia’s worst performer in 2020 to its best so far this year. That’s probably because the index’s cyclical and value stocks make up 80% of its size – and they have a lot of room to rise after falling 12% last year.

You might also like: How to know if you’re a growth or a value investor.

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2. Analyst Take

How To Beat Your Biases

What’s Going On Here?

Investing’s easy when markets are going up, sure, but a time will come when you’re not sure if you should sell or not.

And at that moment – whether it’s because markets have dropped, or because other investors have soured – your emotions might push you to take the wrong decisions.

But the more aware of your biases you are, the better you stand to do.

Availability bias, for example: that’s when you overemphasize the most recent and easily available information, including anything about investment performance.

Or framing bias: investors love a good story, and plenty of evidence suggests their decisions are heavily reliant on how that information is presented.

So that’s today’s Insight: how to put in place a process to stop your biases getting in the way of your long-term goals.

Read or listen to the Insight here

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Check, Please

What’s Going On Here?

Turns out America’s economic support package is already going a long way: the OECD raised its forecasts for global economic growth on Tuesday.

What Does This Mean?

Now that the US has greenlit a $1.9 trillion economic support plan and the vaccine rollout is in full swing across the world, the OECD thinks the global economy will grow 5.6% this year compared to last – up from its 4.2% forecast in November. The spending plan has boosted the OECD’s estimate for the US’s predicted growth too: up from 3.2% to 6.5% – a jump that single-handedly lifts global economic growth by a full percentage point. As for the rest of the world, the OECD’s feeling more positive about the UK, the eurozone, and Japan as well, along with emerging markets Brazil and Mexico. But China, for once, is coming up short: the OECD slightly lowered its growth estimate.

Why Should I Care?

The bigger picture: America makes the world go round.
For all the talk of China’s rising dominance, the US is still the world’s biggest economy – meaning it has an outsized impact on the rest of the world. Case in point: the OECD estimated that higher US economic growth will add about one percentage point to Canadian economic growth, as well as about half a percentage point to the eurozone’s, the UK’s, Japan’s, and China’s.

For markets: How to spend it: US edition.
According to investment bank Jefferies, Americans who receive $1,400 checks as part of the US economic support plan are likely to spend them on clothing, home improvement, outdoor dining, and travel (tweet this). So once that cash starts landing in people’s accounts, shares of American retailers, restaurants, and airlines could see a boost of their own. Then again, a third of wealthier Bloomberg survey respondents said they’d put their cash into savings, so maybe you’ll want to hold fire on that...

You might also like: Three ways to spend your stimulus check.

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💬 Quote of the day

“Have a vision of excellence, a dream of success, and work like hell.”

– Dr. Samuel DuBois Cook (a political scientist, professor, human rights activist, and civil servant)

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📚 What we're reading

How one runner started a war (Jezebel)
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🤔 Q&A · RE: Just The Tip

“Why are investors selling off high growth stocks like tech on high inflation fears? Isn’t inflation usually good for stocks?”

– Elle in London, UK

“Generally speaking, stock prices shouldn’t be negatively affected by inflation because most companies are able to raise prices by at least as much as inflation over time. If, for example, wages go up by 2% a year, companies can probably raise their product prices by about the same amount. The bigger worry for investors is a rise in interest rates, which typically follows a pick-up in inflation. Higher rates mean more income from safer investments – whether cash in the bank or new government bonds. That makes them more attractive than some of the riskier assets out there. And right now, investors reckon high-growth stocks – some of which are at eye-wateringly high valuations – are among the riskiest, so they’re selling them in anticipation of rate hikes to come.”

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📲 What’s Next For Tech: 6pm UK Time, March 10th
🏦 The Next Decade in Banking: 6pm UK Time, March 11th
💰 The Evolution Of Crypto: 6pm Dubai Time, March 12th
🌍 Thematic Investing with VanEck CEO: 6pm UK Time, March 16th
🕶 Investing in Virtual Reality & 5G: 6pm New York Time, March 16th
👌 The Three Most Important Metrics In Investing: 6pm UK Time, March 18th
💉 Investing In Healthcare: 6pm UK Time, March 22nd
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🤑 A Guide To Crypto In 2021: 6pm UK Time, March 25th
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😡 The Influence of Behavior on Investing: 5pm UK Time, March 31st
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Finimize - 🏀 Tech stocks bounce back

Today's big stories

Quick Fix

What’s Going On Here?

What Does This Mean?

Why Should I Care?

How To Beat Your Biases

The best things in life are free

Check, Please

What’s Going On Here?

What Does This Mean?

Why Should I Care?

Invest your money, make a difference

🥋 Woah, you know kung fu

Older messages

💥 Oil goes boom

📈 The US boom is back

🐱 Why NFTs are all the rage

🚀 Instacart to the moooon

⚠️ Don't panic just yet

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