What a Tangled Web

In this issue David Foot makes some observations on the current financial climate and the circumstances that affect it.

The first thing to note is that volatility has returned, to a fair degree, in world markets. As I have said before, a degree of volatility is not a bad thing: it provides buying opportunities for investors and Fund Managers, where they can buy some appropriate stocks at discount prices.

Of more concern is the increasing feeling that the current ‘Bull Market’ in world equities may be coming to an end. Whilst there are plenty of commentators who feel that there is still value to be had, and have little or no concern as regards to the continued rising trend that we have enjoyed for some nine years now, there is an increasing swell of opinion on the ‘Bearish’ side. It is quite clear that markets are cyclical: they rise and fall with no consideration for our sense of timing or order. Sometimes it will be a natural disaster that sparks a fall in markets; sometimes an economic event will do it; sometimes sentiment alone; and who will ever forget the events of 11 September 2001, and the effect that they had on world financial markets?

The Bears are citing the longevity of the current Bull-run as reason in itself for it to come to an end. Whilst a self-fulfilling prophecy, it is clear that the longer the run continues, the more the likelihood of it coming to an end. A little more scientifically, such factors as the Price to Earnings (P/E) ratio of individual companies are used as a guide as to whether markets are cheap, good value, or expensive, along with myriad other indicators and forecasting tools. Many of these are starting to show that the valuations of many companies – particularly in the US – are considerably less attractive than they were previously. There will still be bargains to be had but they are fewer and further between. A little caution should be exercised by those venturing into the markets at the moment. As I have said many times, drip-feeding money is the best way to proceed during such times.

A few words on the Brexit issue: the negotiations are looking increasingly like a fiasco from whichever side one is viewing them. Given that both campaigns now seem to have not been wholly honest about the possible outcome, and the business community has grave concerns about their future planning, the phrase “Oh what a tangled web we weave, when first we practise to deceive” springs to mind!

A very few words about the recent visit to the UK by the President of the United States: not difficult, as I am practically lost for words. Diplomacy and statesmanship are two words that I will certainly not be using in a positive sense. Irrational and unpredictable are two more that I think probably fit better. In any event, between the EU negotiations and Mr Trump’s actions there is little to help nervous markets calm down.

Let’s see how things are in a couple of months. Until then, enjoy the rest of the Summer.

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