WELL, that didn’t take long, did it. We’re just a few weeks into 2015 and the bad news is spreading faster than a man flu epidemic.
All sorts of theories are being rolled out to “explain” falling stock market indices. “As the first two trading days go, so does the rest of the year,” they claimed, but when markets went up next day it became “As the first five days go…” and so on.
So what if stock market indices had fallen? The history books tell us that actually there’s no correlation between a falling January and a poor year for markets. Take last year as an example. Markets were down in January 2014, but to the dismay of economists everywhere the US market then soared.
If you’re tempted to take economists seriously, by the way, let me remind you of the two laws of economics. The first law is that for every economist there’s an equal and opposite economist. The second law is that they’re probably both wrong.
The funny thing is that despite the gloom the FTSE 100 is up 4.5 per cent so far this year, according to Lipper data. So is it time to relax? Not according to economist and hedge fund manager Crispin Odey, who last week predicted a looming recession so severe that we’d remember it for a hundred years.
What does he think is causing this? Falling oil and other commodity prices for starters, he says. Hmm. Not so long ago the problem was rising oil and commodity prices. Or was it a collapsing euro? Take your pick.
In 1983 a so-called expert called Bob Beckman hogged the financial headlines when he published his book The Downwave. In it he predicted a second Great Depression in which asset values would plummet with disastrous consequences. At the same time, over in the US, financial guru Joe Granville was being equally hysterical and pessimistic. Sadly for them and their followers a rampant equity bull market took off and rolled on for 18 years, albeit with the odd scare.
Three years ago arch pessimist Marc Faber achieved celebrity status when he predicted that stock markets and property values were about to crash by up to 50 per cent. Since then the US S&P 500 index is 40 per cent higher and the FTSE 100 is up 20 per cent.
George Bernard Shaw once wrote that “all progress depends on unreasonable men”. Perhaps he should have added “and optimists”. Apple, a company launched by optimists, has just posted the biggest quarterly profit in history and sold 75 million iPhones.
In their book Fast Forward: The Technologies And Companies Shaping Our Future, Jim Mellon and Al Chalabi list hundreds of tech businesses getting ready to change our lives and investment returns dramatically.
But still pessimists grab the headlines and keep savers so fearful that they leave their cash in deposits and consequently receive almost no returns.
I’d rather follow those who undertake research and who don’t have axes to grind or a fund style to sell. And right now these folks don’t see crisis storm clouds gathering.
Alan Steel is chairman of Alan Steel Asset Management