There has been a rise in the interest of Filipinos with regard to stock market investing. Financial advisers often recommend stocks to be in one’s portfolio and for a good reason, it has given the investor good returns for sometime now. However, stocks are also one of the most volatile investments and many have ‘lost their shirt’ in the stock market, so to speak.

Are we seeing a continued bull run in the Philippine Stock Market for 2015? Marvin Germo, one of the country’s most popular stock market enthusiast shares his views on where the market is heading for 2015.

The 2015 Outlook of Marvin Germo

I love watching basketball. I love the part where the underdog, who has been trailing massively in the first 3 quarters start to turn things around and shift things toward their favor. I just love seeing that sight, to see people who have been battered and forgotten move forward and shift from losing to wining.

I believe that this is what is happening in the Philippines. I believe we are surging like never before. The economy may not be perfect and there are things that I think still need to be changed. But like the basketball team I know we are moving up instead of falling down. All the cards are stacking right towards our favor.

What has changed?

1. Our GDP is still strong, relatively higher than most of our peers in region and also as compared to its historic average. The economy was flying prior to Yolanda but it slowed down a bit in 2014 due to its effects of the typhoon. But I believe this year our economy would pick up further. Our GDP is still and will be consumption driven, this means that as more Filipinos spend our economy would grow as a whole.

2. Two years ago we moved from speculative to investment grade but not just that over the past few months we have proven that we can go higher than that as evidenced by more and more upgrades.

3. Inflation is still low, as oil prices continue to drop worldwide, I believe this would further slow down inflation in the country.

4. Interest rates are also low, this means more people are taking loans. More loans allow other sectors in the country to grow. In spite of more people taking loans our Non Performing Loans ratio is still relatively low, this means that people are paying their loans and not defaulting on them. As interest rates are low, this also means more liquidity in the market. It shows that more people would be taking more risks to get more gains. This is good for people involved in stocks and equity funds.

5. We are the top 23rd in the world in gold reserves and top 25th in US dollar reserves beating other 1st world countries.

6. Our unemployment rate is relatively lower, meaning more jobs are being created for our countrymen but aside from that we are seeing also more OFW remittances that help energize our consumption driven economy.

7. More money is also heading the government’s way as they are now able to collect taxes more effectively, which in theory can be used to further our economy.

8. Aside from this our debt to GDP ratio also has continued to drop.

I could go on and on about how things are doing well for our country. However as what I mentioned it is not a perfect economy and certain adjustments need to be made.

What needs Improvement?

1. I believe the government still needs to increase spending and infrastructure spending needs to be a priority. More infrastructures built would bolster business, tourism, and make growth inclusive to everyone.

2. We also need to see more foreign direct investments that will create real jobs and not just money flowing in and out of the stock market.

How does this fit our investments?

Given that interest rates are still low and there is so much money moving around. I believe equities would still take the helm this year. If you are an investor try to align your investments with anything that is related to stocks. Either via direct stock investing or via an equity fund.

Will the PSEI hit 8,000?

I believe no one has a crystal ball to determine where the market will go. Stocks over the short term still move with respect to sentiment and supply & demand. However, given the fact that the fundamentals of the Philippines remain to be amazing, I believe its not a question if the PSEI will hit 8,000 but rather a question of when.

Also as an investor, you should ask your self the question, should the market hit 8,000, would you be buying, holding, or selling? The technique to earning in the market is by having your own strategy and sticking to it.

If you who want to maximize the growth of our economy, I suggest to invest in stocks that are consumer related (Read: Stocks and our Consumption Driven Economy) or if you are entrepreneurial create businesses that will cater to consumption. At the end of the day as more Filipinos spend businesses aligned to consumption will produce more earnings. In stocks, stock prices follow earnings that move up.

Is our market relatively higher?

Yes it is. The PSEI is more expensive compared to other foreign markets in the region. This means that more investors may be more cautious to come in and may wait for the market to go a bit lower before they start investing.

As our market is relatively higher and for those who are a bit more conservative, you may still go for stocks. However, go for stocks that give higher dividends and are less volatile. This is so if the market would correct you still get your dividends and you don’t get hit much by the volatility.

Technicals

On a technical analysis level the market is still in a good uptrend from its reversal in 2009. The 200 day moving average support (as of this writing) is at 6,960. As long as we stay above the 200 day moving average I believe the market can still push up further, however if this breaks downward, you may consider taking profits.

While as of this writing, the peak of 7,400 has been broken twice this year. What I would like to see is that the PSEI stays above 7,400 and builds a support there. If 7,400 holds, over the short term we may see the market move towards 7,600 then eventually 7,800. After that the road to 8,000 doesn’t seem so far off.

Will the market move up on a straight line up? Not necessarily! As always markets drop, when majority of investors take profits. You may also want to consider that the PSEI has been more than 27% up since the start of 2014 and a lot of investors are also waiting for a proper time to take profits.

At the end of the day, it is you as an investor who will make the decision on what to do and how to trade your portfolio. If you are a trader stick to your technical analysis and your trading plan. If you are an investor buy reasonably priced stocks that are cheap, growing and stick your fundamental analysis.

If you are investing in equity funds, either via UITFs or Mutual Funds stick to your financial plan. Don’t just take out funds because of emotion and just because the market is super high or low. Stick to your fund knowing that your fund manager knows what they are doing and that’s the reason why you are invested with them in the first place. Only take money out when your plan or goal has been hit.

At the end of the day I believe 2015 will be a great year for you as an investor. The Philippine economy which used to be an underdog is reversing, moving forward and surging higher. It’s time to be invested and to take part of the progress. God has great plans for you to prosper and to succeed in life. It’s time for you to step into them!

Have a great 2015 ahead!

Marvin Germo is an engineer by education and a Registered Financial Planner. He is one of the country’s most prolific stock market enthusiast and an advocate of stock market education. He is the author of two best selling books  (Stock Smarts) on the stock market, a columnist for Business Mirror and Rappler and speaks locally and globally.

To a great degree, investments are generally affected by economic cycles. You always hear people encouraging you to make investments because the economy is good. You also hear businessmen complain a lot when the economy is bad. The economy goes through changes from time to time which we normally refer to as economic cycles.

Economic cycles are fluctuations in the economy between periods of expansion or growth and contraction or recession. Factors that determine cycles are usually Gross Domestic Product (GDP), interest rates, employment numbers, consumer spending and the like. Investopedia further explains: “An economy is deemed to be in the expansion stage of the economic cycle when gross domestic product (GDP) is rapidly increasing. During times of expansion, investors seek to purchase companies in technology, capital goods and basic energy. During times of contraction, investors will look to purchase companies such as utilities, financials and healthcare.”

People are more likely to invest their money during when the economy is in its growth cycle and they are likely to stay away from investing when the economy contracts. What should be the right investment approach during the economic cycles? Should you stop investing when the economy is down and invest when it’s growing?

Economist and finance advocate Dr. Alvin Ang’s position is as follows:

“My take on business cycles is that they are closely related to productivity growth. Sustained growth of productivity usually predicts expansion. The investment strategy during this phase should be aggressive commensurate to the growth of productivity. It’s a time for accumulation as household capacities are expanding as well. During slowdown of productivity growth, leading to Decline, investment strategy should mimic the rate of productivity slowdown. During recession productivity falls sharply. Investment becomes least priority but the strategy is to continue with an established base amount at least 10% of the rate invested at aggressive phase. This should go up commensurate to the rate of recovery.”

Seasoned stock market investors, especially the more aggressive ones like Marvin Germo may take a contrarian approach when it comes to investing in economic cycles. Stock prices usually would go down prior to any economic decline so they will start to stay away from the market even if the economy is still not yet at a decline. The stock market will usually be at it’s lowest during a recession which is a signal to investors to start accumulating good quality stocks at a bargain. I once heard a stock market expert say to ‘start selling stocks at the sound of bells and start buying at the sound of alarms’; in other words, buy when people are afraid to buy and sell when people have been buying like crazy. This approach is typical of many who have a trading strategy. Recessions to them are opportunities to make a killing in the market. Interestingly enough, many of SM’s major investments were also done during bad economic times (SM North EDSA, Mega Mall, etc.) since cost of land, labor, etc. are much cheaper. In 2013, the economy was doing really well, and yet there was a big correction in our local markets. In the short term, prices may not always be a true representation of real value. The chart below shows the performance of the PSEi in 2013:

Other investments such as fixed income are also economy sensitive but not as anticipatory like stocks. When the economy is in a decline, prices of bonds normally go down and with that, yields of bonds will go up as a result. Although not as volatile as stocks, capital losses can also be experienced if you have a short-term orientation.

If you are a long-term investor and you are investing according to long-term objectives such as retirement, education funding, etc., cycles should not have an adverse effect on you. In a longer period, say 10 years and while markets will go up and down, and even experience crashes such as the 2008 crash, it is expected that markets will recover and will still go up despite volatility. For long-term investors, the issue is not so much on volatility but really on time. I often remind people that stock market investing is not just about timing, it is also about time. The general rule in investing is this: the longer, the better. The chart below shows the PSEi in a 10-year period. You can see that the market, though very volatile is on an upward trajectory in the long term:

Fixed income investments (Bonds) will not have any capital loss and yields will be realized if it is held up to its maturity. Just like stocks, bonds will do well in a long period, with less volatility.

When investing, it is very important to determine your investment objectives and time frame first. It is generally a good idea to hold on to your investments up until the time you need it and if your horizon is rather long, say 10 years, you should not be too nervous every time you hear negative news about the economy. A properly diversified investment strategy should allow you to hit your objectives even with the different economic cycles if you in the long run. Opportunities are also there for the taking when economy goes down, as long you are patient enough to wait when the economy rebounds and you have the appetite to take risks.

But alas, always remember that money and investments are just tools and they are not the end goal. In God’s economy, there are no recessions.

“But lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal.” – Matthew 6:20, ESV

Learn more investment strategies at the Money Manifesto Conference. To register, CLICK HERE.

Join my last public event for 2014, the Money Manifesto Conference on November 29, 2014 at Room 1 at the SMX Aura in Taguig City.

What is this conference all about? 

This event will highlight valuable personal finance learnings that will instruct, inspire and empower the audience to achieve their goals in life.

Joining me for this event are my friends Jayson Lo and Carl Dy.

A much sought after motivational speaker, Jayson Lo is the best-selling authors of “YOUnique” and “Debtermined”. He will talk about the money behaviors people have and how to have the proper money mindset to get out of debt and achieve your goals in life.

Carl Dy is one of the country’s foremost expert in real estate investing. He recently authored a booklet titled “6 Steps to Renting out your Condo.” He will show us the right way to invest using real estate and that this is not an investment limited to the ultra rich.

Incidentally, my newest book “Money Manifesto” will also be launched during the conference. This book has been highly anticipated and has been recommended by BSP Deputy Gov. Diwa Guinigundo, Rivermaya front man Mark Escueta, economist Dr. Alivn Ang, international celebrity Christian Bautista, RFP’s Henry Ong, Stock Market expert Marvin Germo, BPI’s Marketing head Jojo Ocampo, international investing expert Jess Uy, and many more.

The conference is for only P750.00, a bargain for the quality of seminars we offer. What’s more, if you register and pay before November 12, 2014, you only need to invest P500.00

For inquiries and registration, please get in touch with Carl Magsino at 0917-4433832, 988-8469 or email carl@randelltiongson.com

You can also register on-line by visiting —  https://docs.google.com/forms/d/1B_O0aF_qvsxzOgZQyhFRIF8oDOExiU95nkPtCBUvSzE/viewform

This conference is presented by BPI and Sun Life. Supported by the RFP, Angat Pilipinas Coalition and Alveo Land.