Tuesday was an “Interesting” day in markets. Monday’s full-on wobble in global equities reversed into a buying binge as investors sensed the opportunity to buying a cheap market, at pretty much the same price it was the day before when they sold because it was an expensive market. What had changed? Precisely nothing.
You could dig into the details and guess on Monday people got scared of the ongoing consequences of Covid. On Tuesday the market voted again and decided the pandemic isn’t an issue… Basically it’s a market bouncing off the walls, looking for something to trade around.
The fundamental divide between Equities anticipating recovery and Bonds pricing in recession continues.. Its contradictory… but, hey, that’s what makes some folks sellers and others buyers.
Yet, there is definitely a tinge of fin de l’age about current markets, a sense it’s all gone a bit far. We’ve got lots of well followed Uber-Bears warning the globe is on the edge of a massive equity correction and that current prices are unsustainable. On the other hand; the market is largely composed of pragmatists who swim with the current. They understand Central Banks would like to take the distortion out of markets and normalise interest rates, but are determined to avoid a major market crisis…
Which will prove the right view? Anticipating a catastrophic correction, or swimming with the flow? I’m sticking with a 20% gold allocation… just saying…
On any fundamentals, common sense measure of value, stock markets are absolutely inflated after 12 years of sluggish growth and stellar market gains.
The word is bubble.
But central banks can’t afford for that bubble to burst – an imperative the markets have been arbitraging since 2009 – and the US stock market is now worth 3 times what it was then.
Let’s see… Central Banks bankroll the markets… Markets rise.. Is there, by any chance, a connection?
Observations: i) The big risk to markets is Central Banks pulling support and stimulus. ii) Central Banks don’t want nervous markets.
Oh, I didn’t even mention inflation… don’t worry.. I will.. tomorrow or tomorrow, or the day after that..
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