News
07/05/2009 - Start of the Bull Market
I may regret saying this but after Anthony Bolton called the end of the bear market, it is time to take off the tin hats and start investing again.
Bolton told Bloomberg news last week that the equity bull market had begun. “Things are in place for the bear market to have ended. When there’s a strong consensus, a very negative one, and cash positions are very high as they are at present, I’d like to bet against that” he said.
I am hoping Bolton is right this time but he is not perfect. Last autumn the former Fidelity Special Situations Manager said stock markets were at or near their lows only to be proved wrong as markets lurched lower. However, Bolton did not become one of the country’s best long term fund managers for nothing. He called the Baghdad rally perfectly in 2003 and the fantastic performance that followed.
We are also right to be cautious following last year’s horrors. But it does not pay to sit on your hands for too long. April’s impressive 8% rally in the FTSE was the best in 6 years and the S&P 500 soared 22% - it’s best for 9 years.
Is there more to come? It may be just a bear market rally as some commentators are saying. But the reason for being positive is that, despite the welter of negative economic data from around the world, the slowdown does seem to be slowing down. In the UK, insolvencies have shot up, manufacturers are still struggling but there was an improvement in the Purchasing Managers Index. The first quarter GDP figures were the worst since 1979 which the press and media have poured more doom and gloom. However, if you then compare the market performance from 24 November 1979 (similar in timescale from end Q3 1979 to 24 April 2009 is to the end of Q1 2009) as the attached graph shows things do look rather more attractive.
In short, we hear that confidence is returning not only from fund managers but also from a number of our corporate clients. Many fund managers are starting to move from being underweight on cyclical stocks in anticipation of a recovery. Banks are not out of the woods by any means but, with the UK balance sheet backing them, they are not going under.
The biggest threat remains the likely spike in inflation in a few years time. As problematic as that could be, from an equity perspective, even that could be good news.
Graham Laverick
Managing Director
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