EDITOR'S LETTERMerryn Somerset Webb
Market fear and loathing
Flick through this week’s issue and you will see nothing but market fear and loathing. We look at commodities, for example. Oil is down to around $50 a barrel. Gold is at a five-year low. Copper is as cheap as it was in 2008. Mining stocks have been slammed.
We also tell you about the junk-bond market (bonds issued by low-quality firms with higher-than-usual interest payments). This isn’t one many MoneyWeek readers will be actively involved in and isn’t particularly well understood (see John Stepek’s piece on the market). But if you were involved, you’d know that some prices are off by 50%.
Then there is China: the market is down around 25% since its peak and fell 8% in one day alone this week, despite government efforts to prop it up. Things aren’t too good in Western markets either: the FTSE 100 is down 8% since April. There is the odd silver lining: mining sector yields haven’t been this high since the 1990s and we still think that China is more likely to be in the midst of a structural bull market by 2016 than stuck in a bear.
Even so, there isn’t an optimist out there who doesn’t have to admit that the constant abrupt movement (more down than up) in today’s markets is a bit scary. So what’s up? It’s pretty simple. Nobody knows what is really going on.
The signals from the real economy are confounding…
• Read the full editor’s letter here: Market fear and loathing