CEO’s Weekly Outlook - Dip buying works, until it doesn’t

The beginning of this trading week points to a highly volatile week for shares, here in the Asia Pacific region and around the globe. Crude oil prices have surged, and shares are under extraordinary pressure, following negative leads from Friday night trading and a further deterioration in the conflict in the Middle East over the weekend.

Last week saw mixed responses in different regions, and across asset classes. However, by Monday morning markets displayed a decidedly “risk-off” impulse. The $USD/JPY (USDJPY.FX)$ rose above 158 and is just a few percent away from a 38 year high. Traditional safe havens are also under pressure due to concerns about inflation. Bonds are selling off. The $S&P/ASX 200 (.XJO.AU)$ index fell more than 3% in the opening hour, with oil and gas stocks the only green in a sea of red on the market map.

The threats to investment from the escalation of conflict in the Middle East are an economist’s nightmare. The locking up of the Straits of Hormuz blocks between 15% and 20% of the world’s oil supplies. This has a doubly negative effect. It slows economies dependent on those energy supplies as it creates an inflationary impulse that will affect the price of almost everything.

Slowing growth and rising inflation is the recipe for stagflation. Any sustained period of stagflation would likely drag on asset prices across the board, and share prices in particular.

Despite this clear increase in stock market risk, the most common question over the weekend among investors and traders was a variation of “when do I buy the dip?”

It’s understandable. Buying dips has been very profitable over the last five years. In 2020, and again in 2025, we saw an (until then) rare market phenomenon – a V-shaped recovery. The biggest rewards went to those who jumped in quickly.

Trading and investing are activities where some of the strongest lessons come from experience. When markets repeatedly set new highs, just about everyone who bought a dip is in profit. This positive learning has imprinted the value of dip-buying on many investors, especially those who began their market journey in the last five years.

It’s very possible that peace could come to the region quickly, and those who buy the falling market may see profits once again. However, because this crisis threatens stagflation, if there is not a quick resolution, markets may begin a phase which investors with less than five years’ experience have never seen – a grinding bear market.

Those who invested or/and traded through the Global Financial Crisis will understand the reference. From November 2007 to March 2009, share markets sunk. It was a period characterized by false rallies and false hopes. Many times it seemed the market had reached the bottom and turned higher, only for the optimism to turn to dust, sending the index to an even lower low.

It was a difficult time. Many market lessons were learned. The nature and severity of those lessons depended on the individual. For me, it was a painful reminder to leave the ego aside, acknowledge significant changes in the market, and adapt to them.

The future is always uncertain, but in my view uncertainty and risk are elevated right now. There is no need to panic, but some caution this week while the conflict plays out is warranted.

The line in the sand for is the me is drawn on the $NASDAQ 100 Index (.NDX.US)$ , chosen because it is the top tech stocks that led the global markets higher. If the $NASDAQ 100 Index (.NDX.US)$ drops and closes below 24,000 it could signal the end of that leadership, and the beginning of a grinding bear market.

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