Market View – The Sun Also Sets

E L Emerson

The first week of 2018 saw stock market index records being set in North America, Europe and Asia across both developed and emerging markets. 

The Dow Jones and the tech-centric Nasdaq produced their best respective starts to the year since 2006, the S&P 500 went up 2.6% (also at record high levels) on the week, the pan-European Stoxx 600 continued its gains by going up o.8%, and Britain’s FTSE 100 found a new record high as Eurozone inflation stuttered and slowed to 1.4% – down slightly from 1.5% in December. 

That’s the short-term market view, which carries about the same long-term value and importance as a Trump Tweet when he’s standing too close to the mirror admiring himself.

By example, for those of you who remember as far back as the beginning of 2016, the media “bomb cyclone” at that time tortured investors with rants about, “the market’s worst start in 80 years” and the impending financial Armageddon that would inevitably follow.

Some say Albert Edwards, Nouriel Roubini and Harry Dent were seen dancing a Scottish Eightsome Reel as their collective eight-years and running doomsday predictions had finally come to pass.

Alas, that tripartite nature of the chocolate watch melted even before spring arrived as the Dow Jones finished 2016 up 13.42%, the S&P 500 narrowly missed out on ending the year with double-digit gains, and the Nasdaq Composite  ended 2016 with a net gain of 7.5%.

Like so many other stock market weather bombs, polar vortexes and “winter is here” predictions, they proved to be a temporary  setback, and the panicked herd who bought high and sold lower learned once again that the sun also rises.

Equally, we should be aware that this upward market pace should not allow us to forget that the sun also sets, and thereby expect more than a few dips and drops near-term; and pay close attention to how quickly the investor herd then runs away.

There’s always value in understanding the depth of fear amongst the consensus of investors, as stock markets rarely crash before euphoria sets in.

And while there are certainly no absolutes in this game, there appears to be little in the way of a continued rise in markets and momentum, barring geopolitical shocks, global climactic events or, as is so often the case before a crash, a financial stumble that appears so obvious in hindsight  but one that only a very clever few same coming.

And none of whom were dancing the Eightsome Reel.

E L Emerson, Editor, HNW

 

 

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