They Think It’s All Over

Fri 19 Jan 2024

By Brian Dennehy

Access Level | public

Market commentary


quoteThis week many world financial markets seemed to take fright when the UK’s headline inflation number was 0.1% higher than last month, rather than the 0.1% lower which was expected. It was largely due to a one-off price increase because of extra tax on UK tobacco, a shallow foundation which was lost on jittery markets.

This fragility is nothing new. It is inherent at this stage in the long investment cycle.

For the sake of argument, we can say that the 40 years of plenty ended on 3rd January 2022 when the US stock market peaked, as measured by the S&P 500. The new era didn’t begin at that point, merely the transition to a new era, which itself could take a small number of years.

Patience has always been an essential attribute for fund/wealth managers, their clients, and self-directed investors. This need is even greater now.  Partly because no one knows for how long this transition will persist. Partly because investors need to accept that there may be no or little growth during this period.

Excepting occasional voids, investment growth was a given across most of the four decades to 2022. Some might even have come to believe it is a right! The problem with this period of transition is that there is no clear uptrend delivering reliable profits.

The transition began with sharp falls in 2022, then came a mix of sideways drifts punctuated by occasional sharp uptrends. One of the latter uptrends has occurred since Autumn 2023. As you will know from the analysis in the November teleconference, we do not expect this to last.

This Christmas rally was based on some very rosy assumptions about falling inflation, falling interest rates and an immaculate recession (one which involves no pain). The investor mood is as fragile as are these assumptions.

In todays market comment (They Think It’s All Over), we look at investor frustrations, which includes all of the major investment banks, so don’t think it’s just you. But also re-state where the opportunities lie.


Market commentary


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