It has been a topsy-turvy few days in the stock markets, with the will she/won’t she question in relation to a US rate rise hanging over sentiment. Global equities took a bit of a hammering on Monday before Lael Brainard, a member of the Fed’s Open Market Committee, said there was no rush to raise interest rates.
The problem for markets is there’s no firm view in relation to when a rise might come, forcing everyone to live on a month-by-month basis. Surely this is why investing in fundamentals (and not on the back of monetary policy) must be the right course of action for your everyday investor. You can’t beat the vagaries of the market, but you can pick good companies with long-term prospects that you understand.
For a few other examples of what affected the market in the last week, look no further than our volatile friends in North Korea, whose nuclear test may as well have been aimed directly at the Asian markets, sending them haywire. These jitters rippled over to Europe, compounding the reaction to the ECB’s decision to keep monetary policy on hold and not to extend the end date of its quantitative easing programme.
North Korea setting off nuclear explosions aside, industry leaders on the horizon are calling for a bond bear market. Investors should prepare for higher inflation and consequently higher bond yields in times to come. Issuance, on the other hand, has peaked with this week being the best since May for corporate issuance.
Closer to home
As a casual observer you have to enjoy the differing fortunes of Sports Direct and JD Sports. Mike Ashley has been struggling (despite his ample collection of £50 notes) with pesky investors holding him to account – odd, given they seemed content with the status quo and the conditions in his warehouses when the share price was rising.
In the meantime, shares in the JD Sports group rose as much as 7.8 per cent at the start of trading on Tuesday. Today’s rise brings JD’s climb over the last two years to a healthy 250 per cent. Wow! The interesting points to take from the results are the fact that JD opened 20 more stores across Europe during the period, and that the stronger euro helped margins on its euro-denominated businesses – though the company has said sterling’s weakness against the dollar ‘may cause some headwinds’ on margins next year.
I heard the JD Executive Chairman Peter Cowgill on the radio this morning and he was quite rightly pretty cock-a-hoop. I’m sure he’s not too worried about poor Mike’s travails.
Speaking of travails, I’m sure Donald will be similarly cock-a-hoop about Mrs Clinton’s wobbly legs last week. He’s likely to make significant headway on news that she was diagnosed with pneumonia. As mentioned last week, markets have not yet focused on the potential outcome of the US election. Have a look at this Bloomberg article for a take on this. Expect volatility based on facts that over which few of us have any control. They used to say that when America sneezes the rest of the world gets a cold… Look what might happen when Clinton coughs!