Central banks have cushioned a troubled economy with cheap money, and have failed to achieve the economic boost they had hoped.
In the stock market, the key to winning has always been diversification. Always. Be it different assets, sectors or market direction, a well managed trading portfolio is diversified.
We now find ourselves, at least in the U.S. market, in an odd space.
Our market is, in some ways, the most unstable it's been in a long time.
Markets are becoming increasingly skittish as the Fed continues to keep rates low in order to sustain positive market moves.
Because maintaining interest rates near zero is unsustainable, the Fed will have to act soon to break out of this new normal. What this will probably mean are some smaller rate hikes to get things back under control.
I can't see how the Fed, given all the time we've kept rates near zero, can possibly raise rates to a long term sustainable level, quickly. It will be a slow grind back to normalcy.
How will the Market Respond? What will this Mean for Growth?
When you add in the foreign currency marketplace, where interest rates are higher, the way currencies correlate can create a mismatch that is painful at best.
When the USD gets the inevitable rate hike, it will significantly influence foreign investors. Enough so, that our market moves won't just create a ripple, but a powerful shift. It may not last long, but it will last long enough. And so we need a game plan to ride the shift to higher profits.
How Diversified is your Portfolio?
The best advice still seems to be to work with individuals, funds, and advisors that ensure your money is highly diversified. If you don't understand what that means, make sure you take the time to vet this thinking out.
Make sure you aren't heavily invested in one or two sectors, or even one direction. Make sure your money is spread across a wide spectrum, from energy, to banking, to pharmaceuticals, to indexes and in doing so, you'll minimize your portfolio risk.
Even though cash doesn't move much on its own, keeping a portion of your portfolio in cash might be very wise.
I understand it's not sexy and it may seem to be very old fashioned, but having the cash to allow you to make a move "when it matters" is how you'll win.
Cash may not be the best investment, but in many ways, it's still king.