The S&P 500 reached another all-time high last week before profit taking took the index lower by a few percent. Everything is still on trend, the US$ is also playing ball, yields are off, and there is everything to like about the state of the markets. So why was the VIX, which indicates the perceived risk in the markets, some 30% higher than this time last week? We are at the start of earning season and people always buy a bit of protection from misses in expectations that could lead to large selloffs. However, there seem to be other factors at play and the clues are in the performance ..read more

Although the summer has not yet arrived for those of us that live in Britain, the constant rain does give rise to sitting inside and reading the tea leaves. Here is what the current levels across the various markets are telling us: Equities certainly look like two kettles of very different fish and you definitely want the ones which are bigger. Nowhere is that clearer than when you compare this year’s performance of the S&P500 to an index that weighs the components equally. There is a 13% (!) difference. It all looks and feels a bit uneven, but that’s what we thought when the index bro ..read more

The gift of clairvoyance is one thing, but timing is quite another. This makes speculating on major market inflection points potentially very costly. However, when the ball has landed on black ten times in a row, very few of us can resist dismissing unconditional probability. So, which of the following extreme differences in price of one versus the other is the most likely to turn? Candidate number one hit a record high of eight during the mayhem of the dot-com bubble, before falling more than 80%. Then AI came to the rescue. Now, the price of the Nasdaq is trading close to ten times highe ..read more

The Euro is down more than two and a half percent against Sterling in the last month. To the untrained eye, this may not seem like very much, but in the big picture, this is akin to a slaughter of epic proportions. On the surface, the move should probably not be interpreted as the strength of one, but rather the weakness of the other. So, what’s wrong with the Euro? Rather than wading into the raison d’etre of a monetary union of sovereign states with different fiscal policies, it does seem that Macron’s election gamble may have something to do with it. Of course, it doesn’t help that Germ ..read more

The recent election in India is just the latest example that it is very hard to predict human behaviour and opinion polls do not matter. However, in the UK, things seem rather clear, and we are merely a month away from the greatest expected shift in government policy of 14 years. Resisting the temptation to wade into politics, what does it all mean for us as investors? Not much. Four fifths of the revenues of companies in the FTSE100 index now come from overseas. It is the global marketplace that matters when it comes to the valuation and performance of shares. Many companies have listings ..read more

Global stock markets are up about 10% this year. Never mind what they say about May, but is there ever a time when we should take some money off the table? After all, we have just received the entire expected annual return for equities in a mere 4 months, and last year wasn’t half bad either. The problem with getting out is that we don’t know at what level we can get back in. Sitting in cash and waiting for the markets to come our way can be very expensive if we are wrong. There is also a big difference between trading and investing. If you want to do the former, then you have to do many t ..read more

Many of our windows are made of aluminium these days, much of the wiring in electrical equipment is made of copper and we use a lot of lead for plumbing. The point is, not much construction or manufacturing gets done if industry does not have these basic ingredients at hand. As such, the prices of these so-called base metals can be used as a lead indicator for economic activity. So, does the recent price surge of 20% in most of our favourite metals, suggest that output is picking up? The thing with commodities is that you never know if the cart is in front of or behind the horses. Moving a ..read more

Then it all became clear. Inflation is proving stubborn and the longer interest rates stay at this level, the more damage it does to government, corporate and household budgets. The only saving grace was growth and we piled into the idea that AI is going to save the world, which came crashing down when Nvidia lost 15% last week. Rates and currencies are already back to pre-seven-rate-cuts levels, and if the S&P 500 does the same, it means another 20% of downside from here.    There is also an election coming up for 350 million people to determine the most powerful man in the w ..read more

Gold has gained 20% in the last two months and reached an all-time high of 2400 last week. That’s great, because prior to that, Gold did next to nothing for more than a decade. People are clearly worried, there are wars, there was government buying, and something to do with Gold’s inverse relationship with real rates, which is no more. What the current price of Gold suggests apparently, is that central banks may not be able to cut rates to help the economy, because inflation remains too high. That’s not good, neither is the pending apocalypse, but remember the last thing we will be doing in ..read more

Remember October? The economy was sputtering, hope had become a dangerous thing (Shawshank Redemption, 1994) and the S&P 500 was on its longest monthly losing streak since March 2020, down 9.4% from the highs, standing at 4100. Then something very strange happened in the neighbourhood (Ghostbusters, 1984), and talk of seven rate cuts in 2024 made the rounds. In an instant meat was back on the menu (Lord of the Rings, 2013), oil prices fell to 68, the Dollar index plummeted to 100, and the biggest equities rally we have seen in decades ensued. Merry Christmas. The problem was that the g ..read more