If you had gone to sleep in the tranquil third week of September, and woken up in the fourth, you would have been startled by this range of headlines:
- “US risks running out of money”
- “Petrol panic stokes fears over looming stagflation”
- “Boris in battle to save xmas”
- “Stagflation fears grip markets”
- “UK ready to call in Army”
- “Panic over inflation triggers global market sell-off”
And the stock market responses were… zilch. UK and European broadly unchanged, US and China down 2%. Asia ex-China is up a touch. The pound? It “slumped” to sit just above the middle of the range it has been in for the last 5 years.
Bonds? UK 5-year bond yields remain below where they have been 85% of the time in the last 10 years. Remember, if notable inflation is anticipated, bond yields go up, notably.
The relaxed markets might yet be shown to be wrong, and the twitchy headline writers be vindicated. But we mustn’t spend too much time trying to unravel this jumble of cross-currents, or get sucked into this emotionally-charged atmosphere.
There are nervous rumblings for sure, reflected in those headlines. The market extremes are extraordinary, whether US equity valuations or global bond yields, or manic investor behaviour. But much of this has been in place for an extended number of years, so these observations do not add much to what is already understood i.e. markets remain vulnerable to any new shock, which is inherently of unknown nature, scale, and timing.
More positively, the FTSE 100, as an indicator of broader confidence in the UK, has still neither broken up towards the peak of 2018, nor broken lower – it remains stuck in a range. Nor has the US stock marker broken lower with any significance, despite near hysteria in some quarters. The positive take is that there have been plenty of excuses for sharp falls – but investors appear to still have significant underlying confidence.
In a similar positive vein, while we fret over whether there will be turkey for Christmas, there are amazing technological advances taking place in the world. This BBC Sounds recording is well worth a listen. If you are in a hurry, go straight to 11 minutes in. Quantum computing will radically transform the computing world.
A task which would take nearly 1 billion years to complete on a computer today, will take a few minutes with these new machines, and could rapidly solve many of the current global problems.
Sadly, this mind-boggling tech will not be with us in time to get a turkey on the table this Christmas – more like 30-40 years. So as the scramble for Christmas shopping and deliveries gets closer, expect more chaos.
Meantime, we are tending not to make any big changes to portfolios.
