Market Directions

In the last two weeks the global markets have had a series of news that has propelled it higher. The Europeans seem at last under Draghi to be moving in the right direction. Bernanke has initiated a third round of bond buying that appears at first glance to be open ended, i.e. up to $40bn a month indefinitely. Against this positive news is continued feedback from real companies that their third and fourth quarters are likely to be lower than expected due to a global slow down in consumer spending. China is also showing signs of faltering, although I think news of its demise is premature. The USA of course faces an election that Barack Obama will win I think, not good for shares, and a Fiscal Cliff which is unlikely to happen despite the mess that the US Congress and Senate are in.

US stocks are above 13,000 and stand out against a world where China, the EU and Japan are all low. The chart below summarizes the situation from 2008 until today and shows that China and Europe have suffered the most, but the US, UK and Japan are all almost at the high point before the crash in 2008/9. I think we may see a correction, but that their is room here for a further 10% rise this year and more next. After all the world has been on hold for over 4 years and returning to highs seen in 2008/9 is not a top, its just a concern. During that 4 year period companies and countries have strengthened their balance sheets, hold a lot of cash and are better prepared than ever before for a testing.