Rowan Dartington: Bears and black swans
Sense must prevail over the negative outlook to break the current market impasse, says Rowan Dartington Signature’s Guy Stephens
Market sentiment is currently pretty negative. We all know that during times like these, history tells us that you should close your eyes and buy without over-thinking the current scary outlook.
However, that is much easier said than done and feels more like foolhardiness and gambling than investing. Many are still saying that equities are the most attractive asset class taking into account the boost to consumer spending from the falls in commodity prices and the bonanza this is providing to businesses in terms of their cost base.
In addition, wage growth is subdued so retailers are well placed to earn super-normal profits as the consumer spends his windfall gain.
The oil price is the nub of the bearish sentiment and it is viewed that without any movement at the OPEC table and beyond, this will lead to an inevitable spate of bankruptcies which could damage the banks who have been lending indiscriminately to the fracking sector.
This appears unlikely and irrational when you consider the stress tests that have recently been carried out and how much better capitalised they are today than in 2008.
Investors are doing a fantastic job of talking themselves into a bearish scenario before one actually exists. If I could draw a cartoon it would show a blindfolded bear frantically searching for an elusive but circling black swan, possibly dripping with oil!
Other popular asset classes are looking less attractive with residential property facing a temporary squeeze up as would-be landlords try to beat the deadline for when stamp duty rises.