STOCKMARKETS are fickle beasts, particularly in a world of short-term trading philosophies. Those who have gone short (bet on a falling price) may decide to take profits; prices may fall to levels that seem attractive; news may emerge that changes sentiment. Ever since my last post, the mood seems to have changed; the S&P 500 has rebounded 5.3% and London’s FTSE 100 climbed briefly back above 6,000 (it is back below that level at the time of writing).

Short-covering and bargain-hunting probably played their part. The latest Bank of America Merrill Lynch survey of fund managers, a useful contrarian signal, showed they had average cash levels of 5.6%, their highest since 2001.  A preponderance of managers expected profits to fall, and world growth to slow, over the coming 12 months. In other words, the bad news was priced in. 

As for fundamental factors, a few may have been at play. China reassured the markets that it was not planning a big devaluation;…Continue reading

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