This bull’s got some life in it yet
With equity markets reaching all-time highs recently, the USA’s proposed infrastructure programme in the offing and a housing bubble in China unlikely, it appears the bear is not due for quite some time.
2016 has been a rough year for most traders and investors, with a fair number of unexpected and unprecedented events taking place. So far the market has laughed off the expectations of the bears that the worst would happen. The year started on the back foot with US interest rate hike shocks, followed by Brexit, followed by Trump, and each time it started to look like the equity markets were finally going to throw in the towel, they rallied something furious and in some cases, went on to sprint to new record highs. The market has been resilient in 2016 and based on that resilience we could expect it to remain so during 2017.
As a testament to the positive sentiment that is prevalent in equity markets around the world, stands what Bank of America’s Michael Hartnett called a “watershed” month for asset rotation and fund flows. During November, the largest five-week streak of outflows from global bond funds in threeand-a-half years took place as well as the largest three-week streak of outflows in global precious metals funds. These outflows from “defensive” and “safe haven” assets were accompanied by the largest inflows into equity funds all year.
This goes to show that those with massive amounts of capital, who had been sitting on the sidelines just watching events unfold in the market, have decided to finally come to the party and start buying stock. So, from one angle it looks like there is a lot of demand for equities out there, and a lot of capital with which it can be bought.
What about China, though? Well, it seems that the world is largely ignoring the Chinese economy’s elevated debtto-GDP ratio and focusing more on the