Well it's full steam ahead for the current Bull market which has been running for five years now. Surely it's time for a correction. Well possibly, but as I commented back in February, I think that this Bull run might continue well beyond some of the most optimistic forecasters predictions.
Why do I believe this? For very simplistic reasons. Firstly, the 2008-2009 market capitulation was extremely severe. Stock prices were pummelled so much that some quite ridiculously low valuations were created by investor panic and forced selling. At the time, I stated that I believed that this had created the investing opportunity of a lifetime, and for many investors this has certainly been the case.
Whilst some stocks are clearly running ahead of themselves, and it's becoming more difficult to find outstanding bargains, they haven't completely disappeared and with a few exceptions, valuations of many UK companies are relatively modest. Euphoria is still some distance away.
Significantly though, true global economic recovery is yet to appear, and when it does earnings for many UK companies may rise significantly. During the recession, companies that survived have become leaner and more efficient and some have benefitted from competitors going to the wall.
Furthermore, low interest rates still prevail. Where else do you invest your money? Gold, coins, wine...? No thanks.
Finally, bears will argue the risk comes from the withdrawal of quantitative easing in the US and interest rates rising sooner than expected. Surely these circumstances will only occur when it is clear that economic recovery is assured and sustained. Doesn't this bring us back to improving earnings for many of our leaner and meaner companies? Indeed many companies on modest earnings ratings may look cheap again as recovery takes a stronger foothold.
Anyway, we shall see, and as stated in a previous blog:-
http://michae1mouse.blogspot.co.uk/2013/02/datong-up-for-sale-markets-overheating.html
"As a long term investor and stock picker I'm only ever concerned whether or not the stocks I hold are undervalued or overvalued, if it's the former then I continue to hold and acquire and if it's the latter then I sell."
There is a good article written in the FT today by Dominic Picarda.
http://www.ft.com/cms/s/0/9e8d7730-3c97-11e3-86ef-00144feab7de.html#axzz2iqAZvLz8
"I would not be at all surprised if UK equities produced double-digit annualised returns over the coming five years".
Anyway, it's a bit of a mugs game predicting the direction of the markets and my next blog will stick with my stock picking experiences and news stories that have been released recently.
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