Investment risks of US Independence Day

THE July 4 national anthem line, the rocket's red glare, the bombs bursting in air, seems a more apt backdrop than usual this year as the US holiday takes place against the still fomenting Black Lives Matter protests, an increasing Covid-19 toll and the highest unemployment levels ever experienced.

This sombre backdrop apparently offers no impediment to the S&P index as it makes the incredible climb to 3,200 after starting from 2,190 just a few months ago. Never has the axiom "trade what you see on the chart and not what you believe" been more appropriate. However, the market can buck the headwinds of the economy for only so long, so from an investment perspective there are still cautionary signals.

This doesn't mean investors should not take a position in an index ETF. It does mean that investors need to shrug off the old shibboleth about the value of 'time in the market' and be prepared to make some belated attempt to "time the market" with intelligent buying and selling. Put more simply, enjoy the current three-month rise but be prepared to sell when it becomes clear this extended rally is coming to an end. Walking away with 45 per cent-plus profit is better than riding the retreat in the hope that in the long term all will be ok.