16 January 2018

Ring in the New

2018 has arrived, with markets close to all-time highs in many instances.


Our own FTSE 100 Share Index continues to hover within a whisker of its recent peak, though in fairness it is worth remembering that this represents a rise from the previous all-time high of only around 10% - and that particular milestone occurred more than 18 years ago! And the nature of our benchmark index has changed dramatically since the start of the new millennium, with financials now less important and resource stocks dominating.

Not that we are the only market that has taken time to catch up on previous highs. The Japanese stock market hit a 26 year high this week, but even that impressive performance does not bring the Nikkei 225 Index anywhere near the previous peak. At the end of the 1980s, this index flirted with 40,000 (it is presently just short of 24,000), but the 1990s ushered in a period of economic stagnation which saw the market fall to below 8000, so the last ten years has seen shares there treble in value.

This time of the year tends to be light on economic data but full of forecasts. Given that this global bull market has run uninterrupted for nearly nine years, it is unsurprising that many pundits are predicting a crash of some sort before too long. While it is true that markets cannot continue on an upward trajectory indefinitely, the timing of any setback is difficult to predict and is likely to be triggered by an event as yet unforeseen. For the present, an approach of cautious optimism feels justified.

On the plus side for investors, the global economic recovery appears intact. China may be slowing and President Trump’s protectionist mutterings could turn into action, though there is little sign of that so far, but most economists are confident that growth will continue. Shares in the US do look stretched in valuation terms, though the current administration is viewed as business friendly. Still, an upset there could have repercussions around the world.

Europe continues to surprise on the upside, with recent unemployment figures continuing the trend of falling joblessness. It is not a uniform picture, though, with Greece still suffering unemployment of nearly 20%, while in Germany the figure is less than 4%. On the company news front, trading statements from a variety of businesses have dominated the information flow, though soon full year figures from US companies will start to arrive. Fortunes have been mixed over the Christmas period for retailers, but the overall picture remains encouraging.


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