Should sentiment defy logic? – Monday Musings 06/12/2021

The only thing that I have learnt is a certainty over the years I have been in this business is that you can never be absolutely certain what is coming round the corner when it comes to markets and their ups and downs. It is a truism that market makers can often predict event driven movements based on historical information. The problem with Covid/Omicrom is that the data does not yet exist. One thing that you can be sure of is that Covid in its many forms is going to be with us for some time yet.

As I have said many times the movement of the markets is not driven just by logic but by sentiment as well. This can mean that markets move ahead when you would think that they should be going into reverse and go into reverse when logic says that they should be booming. This sentiment driver also impacts into our daily lives and guides our spending habits which in turn feeds into the way that companies and therefore markets perform.

Sentiment also comes into the decision making around interest rates. The Bank of England was odds on the raise interest rates this month but the arrival of Omicrom has cast some doubt on this happening despite all the other pressures that would normally drive rates upward. In fact, we were so convinced this was going to happen that we have an office sweep stake on what the new level was going to be. I went for 0.75%, I suspect that I’m on a hiding to nothing.

At the risk of banging and old drum yet again the only way to get through the current market volatility is to have a properly diversified portfolio of funds. For example, this week the FTSE100 has defied events and moved ahead by 1.11% as has the Shanghai up 1.20%i and the CAAC40 up 0.38%. All of the other markets are down on the week including all of the main markets in the USA. As all of our portfolios have exposure to the UK as one of their base asset allocations, they have been to a degree protected from the falls in other areas.

 On the domestic front we have taken the decision at Straight Talk that all staff members will take daily lateral flow tests and wear masks when we meet with clients be that at our office or in their homes or places of work. We will of course carry on doing all the work behind the scenes that we always have done to ensure that we able to offer the best possible service to our clients.

So, to the markets