So it's true. After I commented last week about equities appearing to look cheap, the market has gained several more percentage points. The thought on most investors mind is whether this is another bear market rally or does it signal the possible turn of the bull market.
Anthony Bolton, President of Investments at Fidelity, has called for a bottom in stock, although he did make the same call late last year. My personal opinion is that the economy is not out of the woods yets and this is highly probable to be a bear market rally that may fade in investor memory in time to come.
Bear market rallies are often short and explosive in nature and it's not uncommon to see bounces in excess of 10 percentage points on the stock market indices. I believe that last month's low will mark a temporary floor for global benchmarks and indices may trade sideways, hence it might not be a bad idea to start making some investments in the Equity market although it is most likely moving too early.
Some analysts are still reiterating that the CAPE (cyclically adjusted P/Es) ratios of companies, are still expensive and markets may fall further, but it is very dangerous to time the market and if you are planning to invest for the long term, current valuations appear relatively cheap.
My take as I've mentioned in previous posts is that if you agree property values have stabilised, i.e. levels of personal wealth no longer falling, we should start to see a return of risk appetite in the equity markets and that should initiate the turn of the bear to bull market.
Eric Tan, London
1 comment:
Overall the positive sentiment is driven by US and German sentiment improving and the US housing index stabilising (instead of declining). Retail sales in both the US and Eurozone were also higher.
But, lending is still weak and credit spread seems to be moving in the wrong direction. There is risk that the rising unemployment may start to bite into consumption.
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