You might get asked at interview to explain why with so much bad news around Stock Markets around the world are generally at or above historic highs yet there is an avalanche of global bad news around including war in Ukraine, Syria and Gaza , European economies (except UK) still crippled with zero economic growth, recession still in Japan, an Ebola health scare in Africa and a worrying UK/Scotland independence vote back home.
From a theoretical perspective global equity markets should be significantly lower and plenty of ‘experts’ have been predicting this downward movement in shares over the last 18 months. Predictions of gloom have been relentless. Yet the markets have moved the other way i.e. upwards!
This is the whole point and the reason share markets have climbed a ’wall of fear’. Investors have lost out and not benefitted from rising share prices as they have followed popular ‘experts’ and put their money in safe investments such as Deposit Funds or Bond Accounts. They have been waiting for cheaper share prices which have never appeared. Prices have moved in the opposite direction!
With any ‘bull (rising) market’ the bull wants to run for free with as few investors on his back as possible! Investors have wrongly been positioned for a ‘bear (falling) market’. Share prices may suffer a set-back at some stage but there is a wall of money waiting to enter the market from the many investors who have ‘missed out’. The market is unlikely to fall far and may continue its overall upward assent.
Historically the time to sell shares has been when there is a general air of euphoria around and selling would seem a dumb move! When people are talking about how there is easy money to made in shares. When the person next to you at work has just doubled his money in the latest ‘hot stock’. When news programmes are dominated with stories about the relentless rising market. This was particularly so in 1987 when investors piled in just before the October crash or when the ‘dotcom’ technology boom finally bust in 2000. There is none of this euphoria around today!
With investors out of the market it’s going to take an awful lot of bad global news to appease those prophets of market doom.
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