Good economics makes good politics as well. Most investors will agree with this statement. Yet, we have lived with bad politics driving bad economics for 8 long years. Making a clean break from such an extended bad spell won’t be easy. So, expectations are still running low on reforms. The Congress is trying to bring in reforms when parliament is in recess. A fait accompli or a back door route is the chosen path. How parliament will react depends entirely on how interest groups influence parties in the window of time. Yet, the TINA factor is what seems to be working here. For the government, there is really no alternative. That is good news to the investor.
Successful investment managers have brains, nerves and luck.
Sectoral rotation is an idea that cuts both ways. Large investors keep booking profits in some sectors and move their cash into beaten down sectors. This trend is evident now as the index stays in a range while sectors keep churning. The trouble with sectoral rotation is that large investors are always at an advantage. They move first and buy low. Retail investor’s always play followers and enter when large investors are selling. What retail investors need to understand is that sectoral rotation is a ‘pure’ trading strategy. Long term investors must avoid getting trapped in trading rallies. Going short is another blunder to be avoided.
Sell the bad eggs on the rally. Hold onto the winners.