Geo-political scariness
Assessing the likely direction of stock markets always requires a multi-faceted approach. One needs to be aware of the main macro economic trends within each major geographical region (broadly North America, Europe, the UK, the Asia Pacific region and Japan).
Things like GDP growth levels, interest rates set by central banks and consumer and producer optimism indices will always get a mention in analysts’ and strategists’ presentations, and as context and drivers of market mood, these are important.
However, economics is an inexact ‘science’ and that sort of data is only useful to the extent that it becomes accepted wisdom and will drive market behaviour. For example, a general consensus (which is the best you are ever going to get) that interest rates are going to come down will result in changes in the bond yield curve and that will have an impact on valuations. If rates do not come down after a long wait, then the consensus will change and that will have some sort of impact. This is just an example of a ‘macro’ factor impacting valuations and feeding into asset allocation decisions.
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