US markets had another green day yesterday, meaning it is the first time since November that the Dow has been up for three days in a row. A client pointed out yesterday that those countries which still use the Julian calendar, only celebrated Christmas on Monday, so they at least had a Santa Clause rally.
For the first six months of this year, the main focus will be on The Game of Thrones, both the series and real-world politics. Who will win the South Africa election? Who will be in key ministerial positions? How will Brexit turnout? What will happen with US policies now that the Democrats control the house? Where will the chips fall in the China/US trade war? Equity markets will rise and fall as sentiment and predictions change. Remember though, buying equities is for the long-term. You will still own Naspers (JO:NPNJn) and Visa (NYSE:V), long after The Trump is out of the White House.
Yesterday the JSE All-share closed up 0.40%, the S&P 500 closed up 0.97%, and the Nasdaq closed up 1.08%.
I read a good article on Quartz this morning on how investors are predicting doom and gloom for just about every major economy.
The journalist makes the argument that investors are starting to get very nervous about this bull market and inevitably what goes up must come down. I tend to be very sceptical when reading investor sentiment indicators and here's why.
Most investor sentiment indicators such as the Sentix investor index or future economic expectations minus current conditions, means nothing at all in predicting future stock performance.
No investor or even a group of investors know for sure what is going to happen in the future, as Charlie Munger would put it, forecasting is a fools' errand.
These indexes that try to gauge fear in the markets are only right at extremes making them pretty useless as a forecasting mechanism and a market timing tool because you will only know after the fact. The Guardian reported that many economists are dead certain that we will see a global recession in 2020.
The gist of the article is still pretty much valid, which is the fact that the Eurozone, US, Japan, and Germany economies are slowing down and the rest of the world will probably follow. Misery likes company!
However, the conclusion to say at this exact time the markets will crash is totally invalid and absurd as it ignores all the other alternative probabilistic outcome. The best thing to do right now is probably to do nothing.
Spend less than you earn, save and invest the difference but most importantly don't forget to take your medicine and look at your investment statement with less frequency.
Talk of progress between the US and China means that Asian markets are flying this morning, and the JSE is 1% higher for the day so far. The Rand is also slightly stronger, trading below that phycological $/R14 level. Later today, there is South African business confidence report and a manufacturing PMI number.
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