One of our preferred global managers (Terry Smith – Fundsmith Equity Fund), wrote in an update this week on how inflation, rising interest rates and an increasingly likely recession have two obvious effects on equity investments – fundamental effects and valuation effects. He admitted that he has no insight as to the extent interest rates…
The first six months of the year were the stock market’s worst half since 1970, with the S&P 500 having declined by 21% year-to-date. Bonds, which are traditionally seen to provide more stable returns, have also had a torrid year – the ten-year Treasury note having fallen 10% in price. Indeed, it appears there has…
Our first newsletter for 2022, titled The Year of the Fed, outlined why we felt the US Federal Reserve’s reactions to persistent inflation would be the key determining factor in how markets faired this year. What we didn’t know was that their job would become that much harder as inflation had another, and perhaps more…
Given this week’s blowout, where the S&P 500 sold off another 6% to the end of Thursday, we’re questioning whether the global markets are already pricing in a worst-case scenario. The US Fed adjusted its policy in raising interest rates by 0.75% on Wednesday, using the escape clause of data dependency. Equity markets first reacted…
Questions have been raised about the tech sector’s stock market dominance over the past decade and whether this is likely to continue. An article on this subject appeared in a recent edition of the Wall Street Journal. Individual tech stocks have recorded some of their sharpest falls this year, with hundreds of billions of dollars…
Have inflation and earnings forecasts in the US economy peaked? It is these twin peaks, or symbiotic key factors, that are likely to influence market direction over the coming months, as it’s still the US that pulls most of the levers on the global economy. The Fed is well on a path towards monetary tightening,…
Seasoned investors have witnessed a range of events that have surprised over the years – pandemics, natural disasters, political upheavals, wars, terrorism, financial crises… and more recently unexpected, decades-high inflation in many of the world’s largest economies. Most of these events have had a devasting effect on financial markets. In the modern era, no country…
While we have already written much about inflation this year, it seems appropriate to continue in this vein as the actions of central banks, and the consequences of market participants pre-empting or second-guessing their actions, have global equity markets on the brink of being classified as bear markets – defined as being down 20% from…
History shows that turning points in bear markets occur at the points of maximum pessimism where there is almost a vacuum of optimism. Although markets initially reacted well last week, as US Federal Reserve chairman Jerome Powell pushed back against incremental 0.75 percentage point rate increases (the actual hike was 0.5 bps), markets have since…
