The Fear of the Correction!!!

Glen_Clark

jimjames wrote: »

I'm curious why QE is propping up stock markets.

The P/E ratio and other indicators are still way off any previous peaks and even after the current rally in many cases are not stretched for earnings that companies are making/forecasting. FTSE250 may be slightly different but that is one group of shares.

Have you forgotten why the Stock Market fell?
Let me remind you.
Western Countries ever increasing borrowing to buy from China etc.
Break up of the Euro etc
All these problems are still there and becoming more unsustainable.
Nothing has been solved

grey_gym_sock

well, UK companies are generally doing better than real ppl in the UK. and the stock market is more a reflection of how companies are doing.

the high street is dying? yes, and the internet is booming. that's just change.

social change (not just thinking of the high street, now) can be painful. for a long time. look at the early days of the industrial revolution. ppl were moving to the towns because they couldn't make a living in the country. eventually, that led to a much higher standard of living. but it wasn't a quick win for most ppl. i think we're going through another period of painful social change. that doesn't mean the economy, or the stock market, is going to collapse.

dealer_wins

There is no such thing as a correction. Any share is only worth what someone is willing to pay for it on a given day.

Jonbvn

NPowerUser wrote: »

No reason why the stock market in the UK should be so high, just because America is swallowing the koolaid whilst the housing bubble re-inflates in the USA.

Look around you. Most of my friends are paying down debt, spending on just lifes essentials, the high street dying, government borrowing out of control, the lowest isa returns ever, the pound freefalling. Where are our future generations of school leavers brought up on tax credits going to find work?

Please remember that many of the companies on the FTSE 100 & 250 do a lot of their business outside of the UK.

Reaper

My crystal ball says this year will be exactly the same as the last two. Rising stock markets for the first part of the year and falling ones the rest of the year.

I expect the market to continue rising until at least mid April as new ISA money goes in (I assume other countries have similar schemes) then at some point people will suddenly be reminded Europe has not been solved yet with a series of crisis events that knock the markets back until Christmas, at which point temporary fixes will allow it to all be swept under the carpet ready to start the cycle all over again next year!

jimjames

Reaper wrote: »

My crystal ball says this year will be exactly the same as the last two. Rising stock markets for the first part of the year and falling ones the rest of the year.

I expect the market to continue rising until at least mid April as new ISA money goes in (I assume other countries have similar schemes)

My understanding is that other countries schemes such as USA are based on calendar year not our financial year so would have different dates anyway. Having said that I don't disagree with your assessment of the year. The trend of sell in May and go away might hold true yet again!

bowlhead99

jimjames wrote: »

My understanding is that other countries schemes such as USA are based on calendar year not our financial year so would have different dates anyway. Having said that I don't disagree with your assessment of the year. The trend of sell in May and go away might hold true yet again!

Well, to take USA as an example, they work on calendar years but your tax return is due the following mid-April, and because you are given a time lag to actually add up your taxes before committing to putting money into a pension or ISA equivalent, you can make contributions for the 2012 tax year right up until mid April 2013.

Also, because of their complex tax system, a much bigger proportion of the population will get tax rebates than would be the case for normal PAYE people in the UK, so up until April there is a surge of extra cash available for investments or just buying consumer goods which helps the economy to sing and then quieten down in May. From then, we can go away until St Leger's Day. Unless it's 2009 when doing that meant missing out on 20%+ growth.

IronWolf

It's pretty obvious why the stock markets risen so much. Interest rates. When the risk free rate falls, so does the yield on every other investment, hence prices rise. Investing 101.