It seems that the new Governor of the Bank of England Mr Bailey (late of the Financial Conduct Authority – where he is judged to have dropped a few clangers) has some quick decisions to make in his first week in the job. When he was appointed the world looked pretty good in that the Golden One had gained power, sorted Brexit and had a chancellor in place who had a clear plan. However, here we are about six weeks later and, apart from the Golden One still being in power, everything has changed. When he looks over the ocean to Trumpland they made an emergency reduction of 0.5% in the fed’s rate which seems to have made a difference in the short term in that the Dow went up and then down again but ended slightly up on the week. The FTSE100 had a seesaw week but ended 1.8% down on the week making a 12% fall in the last two weeks.
So what is the new boy going to do? There are many reasons, most of them called Corona Virus, for a quick rate reduction; but there are many analysts who say that he should not make a change out of the normal economic cycle. As I predicted the markets have had a less scary week. All the US markets were slightly ahead with the Hang Seng and the Shanghai also making gains on the week. Mainland Europe and the UK both had a difficult week with the FTSE100, the CAC and the DAX all down. I am still quite confident that in terms of the markets the worst is over, although we are not close to the firm bounce yet.
Every pundit I have read over the weekend (what a boring person I am) says the same thing: hang tough, don’t sell, don’t panic. A great piece in the Sunday Times yesterday shows that in spite of all of the crashes if you had invested in the FTSE100 in 1986 you would be 1,864% ahead today. Having been in the industry during that time I recall saying to my clients on several occasions: hang tough, don’t sell, don’t panic.
So, to the markets.
|January 2nd||March 9th|
|FTSE 100||7604||6051||Down 20.42%|
|DOW JONES||28584||25864||Down 9.52%|
|S&P 500||3261||2817||Down 13.62%|
|HANG SENG||28543||25040||Down 12.27%|
|CAC 40||6037||4803||Down 20.44%|