In the backdrop of the simultaneous decline of 'U.S. Treasuries, U.S. dollar, and U.S. stocks', known as the 'triple kill', the market is undoubtedly filled with panic and uncertainty. However, such extreme conditions often give rise to rare investment opportunities.
Step one: Where are the opportunities hidden?
Opportunities are divided into two categories: defensive opportunities and offensive opportunities.
A. Defensive opportunities: Protect capital and profit from it.
1. Short selling or hedging strategies:
Short selling U.S. stock indices or weak sectors: Hedge against losses or profit directly by shorting the S&P 500, Nasdaq index ETFs (such as SDS, SH) or specific overvalued, interest rate-sensitive sectors (such as technology, consumer discretionary).
Buy put options: This is a risk-controlled strategy that involves paying a premium to obtain the right to sell an asset at a specific price, which can yield high returns during a market crash.
2. Embrace cash and short-term fixed-income products:
Cash is king: In times of severe market volatility, holding cash (dollars or other major currencies) allows you to maintain liquidity to enter when asset prices become cheaper.
Short-term Treasuries and floating-rate bonds: Short-term Treasuries (such as 1-3 month maturities) are less affected by interest rate fluctuations and offer high yields, making them an excellent 'parking lot.' Floating-rate bonds' interest will increase with benchmark rate hikes, effectively hedging interest rate risk.
B. Aggressive opportunities: Contrarian investing, positioning for the future
1. 'Pick up bargains' in the US Treasury market:
Lock in high long-term returns: When the yield on 10-year or 30-year US Treasuries skyrockets to multi-year highs (e.g., above 4.5%, 5%), this presents an extremely rare 'risk-free' income opportunity for long-term investors. You can buy and hold to maturity, steadily earning this high yield, regardless of intermediate price fluctuations.
Invest in bond ETFs: You can buy long-term government bond ETFs (such as TLT). Although prices may still decline in the short term, in the long run, once the Federal Reserve begins to cut interest rates, the price increase of these long-term bonds will be very substantial. This is considered 'left-side trading,' requiring patience and discipline in building positions in batches.
2. 'Pan for gold' in the US stock market:
Focus on high-quality value stocks and defensive sectors: Look for companies with stable cash flows, low debt ratios, and high dividend yields. For example:
Essential consumer goods (such as Procter & Gamble, Coca-Cola): Regardless of the economic situation, people will continue to consume.
Energy and Utilities: Certain pricing power in an inflationary environment.
High-quality financial stocks: In a high-interest environment, net interest margins may widen.
Buy index funds in batches (dollar-cost averaging): In times of market panic, use the 'dollar-cost averaging' strategy to buy the S&P 500 index ETF (such as SPY, VOO) in batches. History has shown that adhering to dollar-cost averaging during crises can lead to very lucrative long-term returns. This can help you avoid 'catching the bottom halfway up.'
3. Opportunities in the foreign exchange market:
Will the dollar continue to weaken? It needs to be assessed. If the 'triple kill' stems from unique concerns about the US economy while other major economies (like Europe) are also facing difficulties, then a decline in the dollar may be temporary, and its status as the world's reserve currency will still provide support.
Pay attention to other safe-haven currencies: such as the yen and Swiss franc. If global risk appetite declines sharply, funds may flow into these traditional safe-haven currencies.
Focus on commodity currencies: If the 'triple kill' is accompanied by geopolitical risks, gold and gold-related currencies (such as the Australian dollar) may perform strongly.
4. Alternative assets:
Gold: In times of stagflation and geopolitical instability, gold is a traditional safe-haven and value-preserving tool. Consider allocating a portion to gold ETFs (such as GLD).
Step 2: Principles and risks that must be remembered
1. Do not try to catch a falling knife: Market bottoms are unpredictable. Avoid making a heavy investment all at once; be sure to use a batch-building strategy.
2. Maintain liquidity: Never invest all your funds. Keep enough cash not only to deal with unexpected situations in life but also to have the ability to act when the market is extremely undervalued.
3. Manage your emotions well: Panic and greed are the biggest enemies of investors. In the panic of the 'triple kill,' when others are selling, you need courage and rationality. Strictly execute your trading plan.
4. Diversify investments: Do not bet all your opportunities on a single asset or strategy. Build a diversified portfolio that includes cash, bonds, stocks (from different sectors), and gold to effectively smooth out volatility.
5. Understand your own risk tolerance: The aforementioned strategies such as short selling and options carry extremely high risks and are not suitable for ordinary investors. The best strategy for most people may be to patiently and disciplinedly engage in dollar-cost averaging and allocate high-quality assets.
For most investors, the core opportunity lies in:
Short-term: Hold high-yield short-term US Treasuries and cash, waiting patiently.
Medium to long-term: In times of extreme market pessimism, buy long-term US Treasuries (locking in high interest) and equity in global quality companies (buying at a discount).
Remember, the greatest opportunities often arise from the greatest panic, but seizing the opportunity requires that you not only survive the panic but also retain the ammunition to strike.
