Recently the PSE index is at a very low level reaching below 7,000. We hear friends saying that it is the right time to buy since the index is very low. But what should we really do now?
I for one is not a technical analyst and I prefer to look at things at a fundamentalist perspective. But it wouldn't hurt to look at the stock market chart to start our discussion:
If you look at the stock market using a one year chart, you will find out that the index is at its lowest for a one year period.
The main culprit behind this is the rising interest rates. US Interest Rates (Fed Fund Rate) has been at 0.25% since the global financial crisis in 2008. But in 2016, they started increasing it almost every quarter which resulted to US interest rates becoming 2% by June 2018. We are also expecting that interest rates to go up by 0.25% every quarter in the coming months. Thus, it is highly possible that by 2019 the US interest rates will be at 3%.
Another factor that is creating a weak stock market position is our rising Philippine inflation rate. Prices of products and services have been increasing quite fast for the past few months. Here is our recent Philippine inflation rate data:
Looking at the inflation rate data above, we can see that the inflation rate has been increasing for the past few months maxing out at 4.6% in June of 2018. Increasing inflation coupled with pressures from increasing interest rates in the US, creates more pressure for Philippine interest rates to also go up. Rising interest rates creates a lower stock market environment. This is because the cost of borrowing will be more expensive meaning companies will need to pay for for interest expenses, it also creates incentives for investors to transfer their funds from the stock market to a more guaranteed and steady investment such as new bond issues or time deposits now that interest rates are going up.
The good side
Error loading remaining article...
If this was helpful, please share or like it.
Be a financial advisor, join our career orientation. - click here.
1. I want to join a FinancePH seminar
2. I want to donate to the FinancePH Literacy Foundation
3. I want to start saving and investing
4. I want to save for my child's education
5. I need advise in setting up my retirement fund
6. I need help in getting life insurance or health insurance
7. I want to invest in the local/international stock market.
8. I want to know if I am financially healthy
9. I Need Quotation For Car/House Insurance
10. I Want To Be A Financial Advisor of FinancePH (Partime/Fulltime)
Write your comments on the article below:
FinancePH is an advocacy group founded in 2014 by a group of financial advisors.
“We are the best, largest, most influential and most preferred financial advisors of the Filipino people.“
Contact us if you have questions regarding tax, business law, stocks, investment, insurance, estate planning or money related.
Visit our FB page to view our upcoming seminars that you can attend.
Or book a free financial coaching with one of our financial advisors here.
View the Financial Advisory team of FinancePH here.
Read Our Previous Blogs: