How Windy Is It . . . ? Monday, 16th May 2016 – No.179
How windy was it last week?
It was a week that contained a lot of hot air, but nothing really happened. All the dialogue was about risk and uncertainty, as we have policymakers around the globe retreating to provide more stimulus in the face of unsteady political environments (UK, Spain, Germany and US to name but a few). This could explain the amount of money that is being withdrawn from the equity markets. Nearly $90 billion has been redeemed from equity funds so far this year, which is the fastest pace of extraction since 2011 and now think back to the political backdrop five years ago; history does not repeat itself but sometimes it rhymes.
In spite of this, developed equity markets rose last week, mainly on the back of robust US retail sales and consumer confidence has jumped to an 11 month high. Part of the price of long-term investing is accepting the illogical volatility that the short-term typically delivers and this current cycle is no different.
What are we focusing on this week? Yes, you guessed it. If last week was central banks, then this week must be data. We have inflation data from the US and employment data from the UK. Next week we have central banks and the week after that will be data again. With so much uncertainty the markets cling to the few certainties that are out there: central banks meetings and data releases. Next Monday marks a month until the EU referendum vote, so that will be thirty one days of argument and counter-argument to contend with.