Six reasons to be cheerful in 2011
I am relatively optimistic for the first part of 2011, so here are six reasons why you shouldn't worry. For now.
Yesterday I posted a list of reasons why we should worry about the markets this year. But regular readers will know that despite the 14 points it ran to, I am actually relatively optimistic for the first part of the year. So here is a list of the reasons why you shouldn't worry. For now.
1. Liquidity. The Fed is persisting with quantitative easing and the more money that enters the asset markets, the higher they are likely to go. This is the big one and the reason I am not immediately bearish this year.
2. Recovery. There isn't any real historical correlation between economic growth and stock market returns, but it is nonetheless nice to see that most statistics suggest that economic recovery in the US is still underway. UK and German numbers look good too. Earnings growth helps.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
3. Inflation. Markets like inflation at 2-4%. High enough to force people out of cash. Not high enough to scare them.
4. Delusion. Or if you prefer, confidence. There is a lot of it about and it is a great short-term support to markets.
5. Momentum. When things go up, both retail and institutional investors tend to buy more of them. On that basis, we might be on the cusp of moving from the acceptance to the exuberance part of a bull market cycle. This is the one I go for most after no.1.
6. Bonds. It is still possible, just, to make a case for equities being cheap relative to bonds.
All other ideas welcome.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
-
Is the stock market open on Christmas?
‘Tis the season for stuffing stocks – here’s what investors need to know if the UK stock market is open for trading on Christmas
By Oojal Dhanjal Published
-
Annual UK rent jumps £3,240 since Covid, says Zoopla
Zoopla finds rental costs have risen 27% since 2021, with rental costs far outstripping wages over that period
By Chris Newlands Published
-
Beating inflation takes more luck than skill – but are we about to get lucky?
Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
By Merryn Somerset Webb Published
-
Rishi Sunak can’t fix all our problems – so why try?
Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
By Merryn Somerset Webb Published
-
Young people are becoming a scarce resource – we should value them more highly
Opinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
By Merryn Somerset Webb Published
-
Ask for a pay rise – everyone else is
Opinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
By Merryn Somerset Webb Published
-
Why central banks should stick to controlling inflation
Opinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
By Merryn Somerset Webb Published
-
How St Ives became St Tropez as the recovery drives prices sky high
Opinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
By Merryn Somerset Webb Published
-
The real problem of Universal Basic Income (UBI)
Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
By Merryn Somerset Webb Published
-
Why an ageing population is not necessarily the disaster many people think it is
Opinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
By Merryn Somerset Webb Published