Investing Comment |
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Your Money > Investing Comment Articles > Mind your eye
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By Richard Hunter, Hargreaves Lansdown
A feeling that perhaps the low interest rate environment and the various Quantitative Easing programmes were taking hold. A slowdown in US unemployment. More detail on the US stress test results and clarity on the ensuing requirements for US banks. Chinese manufacturing and US housing figures showing some more positive signs than of late.And a number of market luminaries articulating why they believe this latest surge in share prices is heralding the beginnings of a new bull market. The result of this cocktail was that the US S&P 500 added 6%, whilst the UK FTSE 100 finished the week fractionally above where it began 2009 – flat for the year, but 27% above its low point in the first few days of March. Yet the US economy, largely predicted to be the one which leads the way out of global recession, saw another 540 000 people losing jobs in April. This was, admittedly, better than the previous month's loss of 700 000 jobs and better than the 600 000 expected. In addition, some of the US property numbers coming through continue to be patchy, complicated all the more by the totally different markets to be found in different parts of the country. That is quite apart from the borrowing with which governments are burdening themselves, and the borrowing which individuals are attempting to repay after years of a credit glut – more savings after repayment of personal debt equals less spending feeding through to the economy. Perhaps the most debatable part of the equation is corporate earnings, where the “e” of the “pe” ratio remains unknown. Certainly, in terms of the outlook coming from management teams across the majority of sectors, a “challenging environment” continues to be the cliché of choice. Meanwhile, the recovery, even when it comes, is expected to be one amidst a slow growth environment. Does this feel like the beginning of a bull market or has the market perhaps come a little too far too fast? This is currently the killer question which is the main topic of debate – although the bulls will point to the fact that a sharp snap back from here could be the final bottom before the market can rest a little easier and begin a sustainable and definite march forwards. In any event, investors need to be prepared for more volatility as this fascinating saga continues to unfold. Richard Hunter is Head of Equities at Hargreaves Lansdown Useful links: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
That was the week that was...
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