Are the markets staying irrational longer than I can comprehend or....

cloud_dog

...am I just no longer able to comprehend relative value any more?

I appreciate they might be getting excited with the lower inflation numbers recently and the hopes of forging ahead rate cuts, and we will have the numpty back in the Whitehouse which is only likely to fuel business / stock markets, but it all feels a little lacking in substance perhaps?

My simple global equity fund is up almost 4% in a little over 2 weeks.

eskbanker

But surely 4% over two weeks isn't particularly significant?

QrizB

The way I look at it, it's either:

1. The big brains in the markets know what they're doing. Don't panic.
2. Nobody know's what they're doing and were just along for the ride.

I tend to switch between both options depending on my mood!

westv

There will be a crash sooner or later. 

cloud_dog

eskbanker said:

But surely 4% over two weeks isn't particularly significant?

Maybe I've lost perspective?

Pat38493

Quite a bit of the changes in recent weeks have been driven from outside the US and by FX rate changes (pound getting weaker).

There's a strong argument that equities, especially US equities, are overvalued at the moment, and sooner or later there will be a correction, but unless you can predict when the correction will occur you won't be able to profit from it - if you exit the market now, the "bubble" might go on for another year or two.  Just don't be surprised when there is a big downward adjustment whether it is next week, or in a year or two.

The media is also crazy - a few days ago they were reporting that the country was in crisis because government borrowing costs have skyrocketed and heads will roll.  The reality is that the market expectations of future government borrowing went up a little bit.  The next day, US and UK reported lower than forecast inflation and the "crisis" was averted.  All this based on figures for 10 years borrowing costs when, as far as I know, the UK gov doesn't issue 10 years gilts every day, so it wouldn't have had any real effecct on the government anyway until the next time they need to issue bonds/gilts.

Moonwolf

Either it is

a) The wisdom of the crowd and the market makers have it all correct, as Francis Galton found in the guess the weight of the bull.

or

b) the markets have become so internally focussed that they no longer care about the weight of the bull, just what people say it is.  The economist John Kay wrote a satirical piece for the FT on this but I can't find a link.

As always, the trick is knowing which of these is true, and that is how people make money.

LHW99

westv said:

There will be a crash sooner or later. 

This time next year we'll all be millionaires

Alexland

eskbanker said:

But surely 4% over two weeks isn't particularly significant?

It can feel a lot of £ when it's compounding on existing gains.

cloud_dog said:

Maybe I've lost perspective?

The same thoughts have occurred to me today when I saw my global equities valuation. I accept markets are often at all time highs but the rate of share price growth in recent years has been beyond any reasonable expectations. The FX rate has also played a part for UK investors. If GBP stays low that will feed into inflation.

Perhaps equities are generating those irrational late-cycle gains?

The trump/musk presidency might become a rollercoaster.

Just be disciplined enough not to mentally bank all the gains for now and run a diversified portfolio to wealth preserve some of the upside in less volatile assets which for now are also offering good return prospects.

cloud_dog

Alexland said:

eskbanker said:

But surely 4% over two weeks isn't particularly significant?

It can feel a lot of £ when it's compounding on existing gains.

cloud_dog said:

Maybe I've lost perspective?

The same thoughts have occurred to me today when I saw my global equities valuation. I accept markets are often at all time highs but the rate of share price growth in recent years has been beyond any reasonable expectations. The FX rate has also played a part for UK investors. If GBP stays low that will feed into inflation.

Perhaps equities are generating those irrational late-cycle gains?

The trump/musk presidency might become a rollercoaster.

Just be disciplined enough not to mentally bank all the gains for now and run a diversified portfolio to wealth preserve some of the upside in less volatile assets which for now are also offering good return prospects.

I'm not looking to time the market or try to make a killing.  As I am about to retire my sale points are already locked in (in / around) end of March each year, and my asset distribution is pretty much set for the next 7ish years.  May re-evaluate once the DBs / SP kick in (probably won't TBH). 

eskbanker

cloud_dog said:

eskbanker said:

But surely 4% over two weeks isn't particularly significant?

Maybe I've lost perspective?

As above, recent £ devaluation will have contributed rather than this being purely a market value issue, but the two major US indices are still both below their early December peaks, so there's an element of recovery from earlier drops too.