Bear Tracks?

By most (all?) historical parameters, global stock prices are unsustainably high!

A brief history:  Between 1966 and 1982, stock markets were roughly flat.  The Dow Jones average first touched 1,000 in 1966 and for the last time in 1983.  The 1982 bottom in stock prices coincided with a multi-generational high in interest rates in the early 1980s.  Almost two generations of investors since have been trained to expect continuously rising financial asset prices  [with a few brief but heart-stopping interludes].

There is now accumulating evidence to believe that stock markets have peaked and have begun a period of decline. There is no certainty in this statement.  Unfortunately, only when it is too late will we have certainty.  An investor has no option but to place bets.  [Even doing nothing is a bet.]  The historical context suggests that a decline could go further and last longer than investors are prepared to contemplate.

We make the hypothesis that global stock markets peaked in January.  Our analytical effort now is to disprove that hypothesis.

Equity market peaks are generally difficult to define.  They tend to be drawn out affairs, in contrast to bottoms which tend to be sharp and distinct with most stocks declining into the same period of panic.  If the markets have peaked in January, it is unusual since they will have peaked in unison.

Leadership and speculative darlings are under attack, but seemingly for specific reasons.

Leave a Reply

Your email address will not be published. Required fields are marked *