WELLINGTON CAPITAL GROUP INSIGHTS: 2018 YEAR OF THE DOG

The best way to predict the future of investments and markets is through meticulous research and hard data analysis. Astrology, while silly to many, offers a fresh and fun perspective and Wellington Capital Group invites readers to take stock and look at the year ahead. The Chinese celestial system is also celebrated in Tokyo, having arrived in Japan during the 7th century, prior to the Nara period. According to the Chinese Lunar Calendar, we have just entered the Year of the Earth Dog and by all accounts it looks like a promising year.

Chinese Astrology dates back 5000 years, and is based on a 12 year cycle. The Dog is the 11th position in the 12 year cycle. Your personal sign is the year you were born, and the Animal of the Year has certain attributes that will influence both a person’s character and the general world. Legend says the Buddha summoned the animal kingdom to say goodbye before he died. 12 animals showed up and he honored each by naming a year after them. In China, stock market activity the first day after the Lunar New Year is the best indicator of market performance going forward, proven by data going back to 2006. This is a good reminder of the importance of starting out on the right foot (or paw, as the case may be)

DOG CHARACTERISTICS AND HOW THIS APPLIES TO INVESTING

According to tradition, people born in the Year of the Dog are loyal, sincere, intelligent and decisive. They are responsible and protective and don’t hide from difficulties. These describe the qualities one should look for in an investment advisor. They need to protect their clients’ assets and be available during difficult markets. Dogs are realistic and shrewd, so they are good at helping clients make decisions and stay focused on their long term goals.

The main weakness of this sign is that they tend to be conservative and risk averse. Every dog owner knows that they have a tendency to hide their toys and bury their bones. With respect to investing, the message here is that while it’s good to save, one does need to take some risk to achieve growth and stay ahead of inflation. In this aspect, a dog’s decisiveness is a benefit – they may be plodding savers but when an opportunity arises, they are effective decision makers and adept at sniffing out whether it’s a scam or a good investment.

During year of the dog, investors should remain level headed and err on the side of caution. Expect volatility as the dog jumps around. Stock markets may see a sharp drop in July, during the dog days of summer, with steady increases through November and January, ending the year on a high note. Transport and gaming companies will take a hit early in the year, and rebound in Q4. Avoid banking and financials altogether.

5 THEMES CORRESPONDING WITH 5 ELEMENTS

1. There are 5 Chinese elements: wood, fire, earth, metal and water. The Dog corresponds to the Earth element. Earth is stabilizing and conserving which is bullish for renewable energy stocks, especially solar and wind energy. Companies that look after the health and welfare of consumers will also do well, favoring the pharmaceutical, consumer and utility sectors. Expect new industrial projects to come on stream that change how man produces and exploits energy. While the Dog has the earth element as its primary sign, its secondary focus is fire and metal. This means that money will come to those dealing honestly, and will reward Wellington Capital Group investment advisors who deal honestly, put clients first and take care of them.
2. The Dog is a yang year with positive and active energy. This is good for tech sector. The other lesson is: don’t let the tail wag the dog.  Meaning, when evaluating potential investments, review your reasons. Many tax shelters, for example, are in fact scams and poor investments and designed to generate tax-deductible losses.
3. Yang is positive and represents the sun in the yin/yang relationship, also seen as negative/positive and dark/light. We can expect a Year of the Dog to end in positive territory. In Asian markets, excluding Japan, Dog years average 4.3% according to data covering the past 3 full Chinese Zodiac cycles. The best performing year is the Rooster, which just finished. In the US, the S&P 500 averaged of 11.6% from 1928-2017 with dog years generating 11.3%. Dogs are positive, if slightly underperforming, which reflects their conservative nature. The worst year is the Snake, notorious for scams, but the next one isn’t until 2025 so investors can breathe easy for the time being.
4. The Chinese Dog is reliable, hardworking and we see the Chinese renminbi gaining respect internationally. This will put some pressure on the USD, although it will remain the reserve currency. This highlights the importance of international diversification.
5. Dogs can be worried and anxious creatures, even if they appear happy go lucky on the outside. This is a key trait in terms of Chinese Astrology and another reason dogs are conservative.  This will be reflected in financial markets: expect to see an increase in inflation and some reigning in of debt and the debt markets, all of which is bad for financial stocks. Investors should be cautious about taking on too much debt this year, and traders should perform regular reviews of their margin accounts.

AND FINALLY, JUST FOR FUN…

Donald Trump is 5th US President born in a Dog year, and first to take office during a Year of the Dog. His canine compatriots also born in 1946 are George W. Bush and Bill Clinton. Other famous Dogs include Winston Churchill, Prince William of Cambridge, Elvis Presley and Justin Bieber. Lucky numbers are 3, 4 and 9, and lucky colors are red, purple and green. Red symbolizes happiness and good luck, purple represents divinity and immortality, and green indicates health, prosperity and harmony - a final nod to the green energy sector.

From the Shar-Pei and the Shih Tzu, the Pug and the Pekinese…Gong Hei Fat Choy!

ABOUT WELLINGTON CAPITAL GROUP

Wellington Capital Group is a privately held investment management firm based in Tokyo, Japan. They work with an international clientele, including many long term clients who have come to count on exemplary service and strong and steady financial returns. The company has a crack team of investment and economic analysts who generate much sought after research reports, providing investors with some of the best recommendations in the business. Their investment advisors are seasoned and approachable, and invite interested parties to contact them with any questions.