Monday mashup – Look at the detail

It is easy enough to find quotes from ‘experts’ suggesting that stock markets have gone mad. Indeed I have written on several occasions attempting to explain why stock markets seem to be doing better than one would expect when we are are now into recessions in most developed economies, with probably worse to come.

But it pays to re-check the actual facts from time to time. Although some share prices have shot up, most of the time that is the claimed “V” or similar recovery shape from deep lows. Here are a few broader facts (data taken from the BBC):

• The S&P 500 (the main US equity index) tech sector is up roughly 25% this year.
• The energy sector of that index is down about 37% and the financials group down 20%. Overall the market as expressed by this index is up a little on its February 19th record.
• Over half the shares listed in the S&P500 are trading lower than they were at the start of this year
• The FTSE 100 is 20% LOWER than its January high.
• The French CAC 40 is also down about 20%
• The Japanese 225 index is within 4% of its pre-crisis high (that will be in Yen terms)

An analyst at the Dow Jones index company is quoted by the BBC as saying that the risks of the US election and the potential for disappointment if the recovery already anticipated by the market does not happen are reasons for caution.

My take is that in many developed countries there is no real chance of an economic recovery in the next few months.

I would expect a ‘lagged’ impact from the Spring lockdowns across the world and the temporary burst of consumer spending that is only a release of built up frustration to fizzle out as job cuts and reduced salaries begin to be felt.

The businesses that have benefited from the lockdowns will in some cases now see tougher competition. It has been reported that traditional retailers, having been forced into upping their game online, are now taking market share from Amazon.

That does suggest it is a good time to hold shares in businesses specialising in online retail technology and distribution, something some fund managers will have picked up.

I hope I am wrong, but I am deferring my hoped for return to optimism.