Friday Email: 18 October 2013
Every Friday morning our lead analyst Mark Riding sends out his weekly run-down and upcoming events in the investor calendar, like this one:
As always, the stock market continues to baffle and defy logic and the last few weeks has shown how the fear factor in the market can work before eventually giving way to the inevitable; A deal in the US that 'kicks the can down the road' again! Moreover, the same woes will be back again come February next year. Expect further brinkmanship with the inevitable rise in volatility and fluctuations in the market in the new year. Taking this further, you should actually plan for it! Back to the present and what of the worlds stock markets from here? We think that they are too high, but we suspect they will go higher with a strong run towards the end of the year as the 'euphoria' stage of the current bull market takes hold. We are fundamentalists (obviously), but when you are running out of value ideas, you start to listen more to the technical analysts. As always, they can see different scenarions in their 'tea leaves', but I was quite impressed with a chartist the other day who pointed to 'triple tops' ahead of the sharp market falls seen over the past few decades. He could have a point, but we think the sharp fall will come in the new year. If the strong run continues, it will not be in a straight line, so expect a fairly bumpy ride.
So the markets roar on, fuelled by QE and the drivers seem to be just that and euphoria over another crisis averted. Hang on though. Surely all of this shows that the US and its government in particular, is in some trouble. This cannot be good news. Surely if we look at the underlying reasons for the past few weeks, with a repeat guaranteed in the early new year, you have to be worried? Holders of US treasuries do not want to be going through this every few months.
The past week was very quiet on the financial reporting front although there were plenty of trading statements. Past dividend of the week, British Sky Broadcasting did not disappoint with its trading statement and topped the leader board yesterday with a 7.6% rise. Next week sees a pick up in corporate activity with a good number of companies reporting and declaring their dividends.
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Read next: 11 October 2013
As we predicted, although the last week had very little in the way of corporate news, it was an eventful week as stocks continued their falls from the previous week. However, it was all change on Thursday as talk of a deal between the factions in the US hit the wires. This resulted in a huge 323 point rise in the Dow on Thursday. There were just two FTSE 350 companies reporting and WH Smith outperformed N Brown group in the dividend department with a 15% increase in the final dividend compared to 4% for Brown. I always keep an eye on N Brown having worked there for 4 years in the 1980's. They have done well.
