Yet if measurable sentiment in recent days in some areas suggests caution, this creeping malaise has not yet toppled the Christmas bounce.
We will obviously return to this in next week's teleconference (14th March). For now, here is a re-cap on some numbers suggesting continued caution, and some new market data with the same message.
In recent weeks we have highlighted data which might stop you/us doing anything too daft in the short term.
For example, the US stock market suffered what has been called a water-fall like decline from October to Christmas. This is how history informs us:
- There were 19 other post-war examples of a 15% uninterrupted decline.
- After a bounce the low was retested…
- …in every instance.
In other words, we should expect the US market to head back to that Christmas low.
Similarly, the US market bounced 5% on 26th December, convincing some that the correction was over. Yet the historical data suggests that moves of 4%+ in a single day only occur when the stock market is already in a bear market.
In every one of these examples you only know for sure with the benefit of hindsight.
More evidence along similar lines came across my desk this week (this time from the
realinvestmentadvice guys).
The quality of the chart isn’t great but the message is clear. It shows what happens when the US stock market has risen at least 10% in the first two months of the year (the green line). The grey line shows what happened in the balance of the year – only once did it make a bit more progress, and one year it was a total disaster.
These are only precedents, not guarantees. And the last few years are full of unprecedented events in markets. Yet, as a minimum, it is surely clear that there is no rush to pile back in.
Chart 1 - Keeping Score