What’s More Important Than Dow 20,000…


By Alan Steel

The Office for National Statistics (ONS) has this week reported that UK GDP growth for Q3 was 0.5%…

…and so I look forward with great enthusiasm to finding out what really happened once the ONS undertakes its usual process of retracting said results and quietly apologising for getting it wrong again in approximately six to 12 months’ time.

It’s these types of misfires that remind me of Ben Carlson and his A Wealth of Common Sense blog where he writes, “When investing, if you don’t know when you’re wrong, how are you going to know when you’re right?”

Well, headline GDP commentary is about as worthwhile to your investments as putting your faith in Paul the Octopus during the World Cup (RIP).

And in amongst all these analyses and baseless predictions – as noted in yesterday’s blog, And A Festering Season To All – is this odd market-wide fervour just now surrounding the Dow Jones’s Himalayan-like trek since March 2009 towards the 20,000 point barrier.

But really, what’s all the fuss?

Celebrity analysts are approaching that marker like it’s some kind of post-modernist Millennium Bug; our objective efforts can’t explain that reality so we’ll simply apply the artistry of our own sentiment; and then everything will be either hunky-dory or hellfire and brimstone.

(It’s as if someone should queue up David Byrne and his big jelly suit as we all Stop Making Sense.)

What is now a reality is the shift that’s happening from bond funds back into stocks.

See the chart above from the incomparable Barry Ritholtz and Co. demonstrating this phenomenon. Sadly, this time round the investor herd’s great rotation is about eight years late to the party. Typical reaction from the herd, really. The fear built up from Dot.com, 9/11 and 2008/09 runs very, very deep. 

Yet some might now suggest this about-face movement (bonds to stocks) is the beginning of the long march towards market euphoria.

Maybes yes and maybes no. We’ll need to keep a watchful eye on the AAII sentiment readings for that one, but for now it seems we’re either several thousand Dow Jones points away from full blown stock market support, or perhaps just one significant setback away from watching everyone run back to bonds.

From Ned Davis’ perspective, the global leading indicators suggest a bullish market view for at least the start of 2017.

Equally good news is their perspective that the global economy was already getting on more solid economic footing well before November’s Trump-euphoria kicked into high gear.

And if all of this is coming as a surprise to you because you’re listening to the headlines instead of the facts, then why not give yourself the best Christmas present you’ve ever had and get some good advice in the New Year.

As we say here at Investor Points of Few, “After all, it’s your money.”

Have a great Christmas folks!

Alan Steel, Chairman, Alan Steel Asset Management

Alan Steel 300 x 289

Follow HNW here - For the life you want to lead...

Leave a Reply

Your email address will not be published. Required fields are marked *