In the past week we have seen the Banks of Japan and China join the queue for printing ink along with the Fed, the Bank of England, the ECB and the Swiss National Bank; many other minor central backs have either cut rates or are about to. Admittedly the Chinese have not actually cranked up the Hewlett Packards but PBOC Governor Zhou said that "China will continue to invest in EU countries' government bonds, and will continue, via possible channels, including the IMF, the EFSF and the ESM, to be involved in resolving the euro-zone crisis". He added that he hopes Europe can offer "more attractive investment products". I wonder what he has in mind. With the support he can muster Greek 2 year bonds on a 200% yield should do the trick surely...
David Fuller's view Accommodative monetary conditions, previously cashed-up investors, plus reasonable valuations have contributed to the best start to a year by stock markets in recent memory. When we measure performance from the troughs of bases which were formed largely between August and October 2011, many stock market indices have already confirmed the cyclical bull market - generally defined as 20 percent plus gains - which Fullermoney has been predicting since yearend 2011.
Nevertheless, how many other people are also talking about a bull market in equities? Not many, which tells us that a significant proportion of investors are under invested in stock markets today.
Instead, we hear a great deal about risks, not least regarding Greece, as many investors understandably recall last August's meltdown and subsequent volatility during the support building phase which followed. We also hear about an overbought condition.
These perceptions are correct. There are plenty of risks although I am tempted to add - and thus it always was. Bull markets climb a wall of worry, to coin another phrase. My guess is that Greece is largely a spent force, in terms of its capacity to terrify global investors beyond the very short term.
At Fullermoney, we think the biggest risk is the price of crude oil (Brent & WTI). This is now a headwind for equities because further increases will jeopardise prospects for global economic recovery.
We have also pointed out that stock markets are short-term overbought following what is now seven consecutive weeks to the upside for many equity indices. This will spill over into a temporary reaction and consolidation, or perhaps a somewhat larger correction if momentum first drives stock markets higher.
These appear to be acceptable risks, provided what you hold is not accelerating too far above its 200-day MA, in which case some profit taking in anticipation of a temporary pullback may be appropriate. Meanwhile, stock market momentum has yet to be checked beyond brief pauses. The leaders of this advance are still leading to the upside, as you can see from The Philippines, Nasdaq 100 and South Africa.