“Their understanding of markets and economics is deep and they have greatly helped my family preserve and grow our capital”

Emmanuel Bueb - CEO, Boomerang Communications (UK, N Am, EU) and Sylvie Bueb (2007)

Focus on... stock markets

Posted by jdavis on February 16, 2016

Is this 2001/02 Mark 2 or 2008 Mark 2?

It does seem to me as if it's one or t'other, economically and markets-wise.

Look at the long term charts of FTSE and S&P500:

2001/02 and 2008 were the last Recessions we have had in the West.

They were different in themselves.  Indeed, one lasted over 2 years and the other under 18 months.

Those Recessions coincided with stock market crashes/collapses.

There are similarities between 2015/16 and the last 2 Recessions.  I have no idea which this will be but it matters not.

It IS likely 2015/16 and perhaps 17 will likely be a Recession and see a stock market collapse, based on what we know just now.

Note, the FTSE and S&P 500 have the same 'rounded top' as the prior two major tops.  This has s long way to run.

 Now see what has happened thus far in markets across the world:

Above are the main stock markets in the US, the UK, Europe, Japan, China and Russia - a representative sample of global markets.

As you can see, from the Spring/Summer 2015 all time highs, markets 'everywhere' have crashed.

The bulk of pensions and investment portfolios are invested there along with Corporate Bonds and Commercial Property.

The next chart shows US shares, Corporate Bonds and Commercial Property:


It will be similar for UK portfolios (just harder to chart).  The major 'Risk on' assets of by far the bulk of investment portfolios/pensions etc have seen major falls in prices over the last year.

We've been writing often of falling inflation (perhaps deflation) and, to combat the challenge, portfolios need to hold Quality Government Bonds.  We've been investing, heavily, during the last year (3 years in fact) in US Treasuries.

 Some folk believe that we neeed to steer clear of Government Bonds because inflation could come back or interest rates may rise etc.

1. IF they happen we'll cross that bridge.

2. The opposite IS happening.  Why go against reality? 

What is YOUR portfolio manager doing?


Now, I have good 'news' and bad 'news'.

The good 'news' is, it appears that markets are taking a breather right now and this could last a few weeks or even months.  So, Govt Bonds may fall in price for a while.  More importantly, for those heavily invested in shares, corporate bonds and commercial property (most folk), similarly, these appear to be reversing up.

HOWEVER, and I really hope you focus on this:

The bad 'news':

THIS IS UNLIKELY TO BE THE START OF A NEW MULTI YEAR BULL MARKET IN THOSE.  ON THE CONTRARY, IT IS MORE LIKELY TO BE A SHORT TERM RALLY IN A BEAR MARKET.  Nothing goes in a straight line.  But a trend is a trend until it is no longer.   The trend is down folks.

So, again, you have been warned.

2015-17 is likely to be a repeat of either 2001/02 or 2008.

The following is what happened to US Treasuries during these times in red (what shares did is shown in blue):

You have time to take precautionary action to avert another 2001/02 or 2008.  Take the action that most folk need to do.

Can I be clearer?  I believe not.

We look forward to hearing from you.



There are no comments on this post. Why not add one below?

Post a comment

What is 2 times three?