Thanks to Joe for stepping in last week.
The latest economic statistics have dominated headlines with numbing regularity. So this week was refreshingly clear, but for the news today the UK economy is not just out of recession but also that growth is “surprisingly strong”. In the short term such news is important simply because it should underpin the mood of investors.
Our premise since March was the expectation of a Spring breather, led by the US. We got that during April, with the notable exceptions of the UK’s FTSE 100 index and China, on which more below. The S&P 500 met our minimum downside target on 19th April, and the bounce since that point is sufficiently strong such that this correction is now over. This will likely be clear in a day or two, and the US inflation data next Wednesday is pivotal to sentiment.
If (still an “if”) the Spring breather is over, that will clear the way for stronger advances across a range of financial markets in the months immediately ahead. Tune in next Friday for an update.
Over the last week China has been the top performer again (FTSE China 50 up 4.8%), closely followed by Europe ex-UK (up 4.4%), with the FTSE 100 being up “only” 3.3%.
The FTSE is now notably above our projection of 8200, at 8444 as I write. On 26th April I said “a rise above 8200 would imply somewhat more upside”, and I stick with that for now. Nonetheless, the chart stretching back to the Noughties is thoroughly unconvincing unless this index is about to explode upwards by thousands of points – which doesn’t seem very likely, but we mustn’t exclude even the craziest possibility.
The FTSE 250, more representative of UK plc, is just short of our 21000 target. Across the pond, the S&P 500 is at a point right now where it must rollover if the Spring breather is not over, otherwise it is heading to new highs. We will be observing these inter-actions in detail and with great interest in the days just ahead.
Equities didn’t have it to themselves over the week. Long-dated gilts “Guvvies” and Treasuries were also up around 3%.
It all feels a bit Goldilocksie, which is why it is good to have someone like John Hussman (see quotation on the right) reminding us where we are in the market cycle.
Only Japan and India were a bit flat over week, though a number of Asian funds still performed well (up in excess of 2%, ranging from smaller companies to income funds), and gold and gold mining funds moved similarly, perhaps ending their pause in April. Gold appears to be moving up in tandem with the drum beat resonating from the Near East, and reminding all investors that financial markets remain vulnerable, lest we forget.
Enjoy a sunny day or two.