Gosh. Are we still here? Clearly nuclear Armageddon did not take place. The crisis in the Korean peninsular rumbles on but markets – so far at least – have remained sanguine. As one writer put it, “How do you price extinction?” Equities pulled back a bit last week in many cases. A couple of percentage points does not equate to a ‘risk off’ crash but it does blow some of the froth off what were feeling like rather stretched valuations.
The underlying macro data remains largely positive. This morning saw Japanese growth beat expectations – only for equity prices to fall as the yen strengthened. No pleasing some people. The minutes of the US Federal Open Markets Committee which sets US interest rates are due this week. Rather like the non farm payroll data these seem to be an almost irresistible source of fascination to some as they pour over them trying to discern the Committee’s next move. Or lack of it. Frankly, it’s a bit like rummaging around in the shrubbery looking for a lost cricket ball. Possibly interesting – but unlikely to be wildly illuminating.
We are still cautious – not just because of madmen with bombs but recognising that there are other potential triggers for the run in equities to reverse in the short term. Cautious, but not pessimistic – and such a pull back would be seen by us as an opportunity to put money into the markets.
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