Deciphering the change in the psychology of market participants
Should you increase or decrease your cash percentage?
Since early March, many investors have moved to sell financial assets, such as stocks, and leave them as cash. So-called risk-off. Behind investors’ risk-off is the spread of the new corona virus, which has made the global economic outlook unclear. They wanted to minimize the risk of their financial assets.
Among the uncertainties, the US economy, which has supported the world economy, has had a significant impact from the downturn risk, and the drop in oil prices due to concerns about declining demand for energy resources. With a growing appetite for cash, risk reduction has progressed rapidly worldwide.
With the arrival of late March and falling stock prices and the US economy, the sentiment of some financial market participants is showing signs of calm. That has supported the rebound in global stock prices in Japan and the United States. However, it is difficult to predict when and how the infection of the new corona virus will converge, and how much it will affect the economy. At the same time, looking at the status of infections in Europe and the United States, we cannot be optimistic. It is important to be calm that the risk factors for the global economy are on the rise.
There is no winning law for investment. In order to protect assets while responding to change, it is important to diversify the timing and amount of money and manage funds within the scope of self-responsibility while considering economic development over the long term and globally. With this idea in mind, individuals will have their own criteria for determining whether to increase or decrease the proportion of cash in a portfolio (combination of different assets).