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.
-
Coventry Building Society bids £780m for Co-operative Bank - what could it mean for customers?Coventry Building Society has put in an offer of £780 million to buy Co-operative Bank. When will the potential deal happen and what could it mean for customers?
-
Review: Three magnificent Beachcomber resorts in MauritiusMoneyWeek Travel Ruth Emery explores the Indian Ocean island from Beachcomber resorts Shandrani, Trou aux Biches and Paradis
-
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.
-
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?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion 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.
-
Ask for a pay rise – everyone else isOpinion 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.
-
Why central banks should stick to controlling inflationOpinion 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.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion 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.
-
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.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion 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.
