Investors would do well to take advantage of annual market volatility in June and buy on the dip, according to Emanuel Datt, chief investment officer of Datt Capital.
“Australian markets typically dip in June as investor rationalise their portfolios by selling stocks in a capital loss position, to harvest tax losses to offset against other forms of capital appreciation crystalised during the year. This has the effect of potentially reducing their taxable income or gains,” Datt said.
“As tax loss season is a very well-known phenomenon in Australian markets, we believe there is a very high probability of a positive July and are positioning our portfolios accordingly,” he added.
In its small company fund, Datt Capital will be looking to deploy a large cash holding and take advantage of good opportunities to buy the ‘blue-chip’ companies of tomorrow at bargain prices.
Instead of being scared off by this predictable volatility, Datt says that investors should follow suit and use it as a time to find good companies at low prices across all sectors of the market, not just small caps.
“This is a time of year that all investors should plan for if they can,” he said.
After all the S&P/ASX 200 (XJO), Australia’s leading share market index, has been positive around 9% this financial year, Datt said.
Although market expectations are mixed around more rate hikes this year, Datt does not expect this to influence market direction.
“Interest rates have been at normalised levels for some time now, so potential hikes will not affect the market materially in our opinion and present CPI numbers are in line with our expectations,” he said.
“Our longer-term market outlook is flat with an upward bias and higher volatility,” Datt said.