There is no doubt that after the latest rattle markets could well end up just continuing to roll along, but equally such an argument could be an example of what Hawkswood’s Jim Wood-Smith described as the flawed habit of making linear extrapolations in a cyclical world.
“When something tends to go up (or down), more often than not, it is the nature of markets to assume that trend will last forever,” he said.
His view, for the record is that politics is going to be ‘the worm that turned’.
“Unless something changes, Mr Trump is going to turn the world protectionist and anti-American (incidentally one in which Russia will make large political gains, and in which China will fill the economic vacuum). This is a world of greater uncertainty, high inflation and higher bond yields. From our parochial perspective of financial markets, it means lower equity valuations.”
Portfolio Adviser has been rather bearish for some time and could well be accused of developing Cassandra-like tendencies, but in the current situation, some caution is likely warranted.
