Stock market in meltdown? I hardly think so

IF you have been reading some of the stock market headlines recently, or watching financial news channels, you could be forgiven for thinking shares have been in some sort of meltdown.

Down for the seventh consecutive day, it was the S&P 500’s worst run since 2011. Then, the eighth drop in succession, not seen since the depths of the financial crisis in 2008. Finally, nine falls in a row had the statisticians reaching back to 1980, towards the end of a 12-year bear market.

All good headlines for people trying to maximise readers/ viewers, but very little perspective.

In 2011 the market fell eight per cent in those seven days; in 2008 the fall was 23 per cent in eight days; in 1980 it dropped nine per cent in nine days. This time around, the index was just three per cent lower over nine days, hardly the stuff that bear markets are made of.

While markets in the US have of late been influenced by law enforcers, the FBI and those Clinton emails, here in the UK they are moving on the pronouncements of law makers, meaning that investors have yet another competence to add, beyond mere financial knowledge when making decisions.

Last week’s High Court ruling on the power of the Government to trigger Article 50 with respect to leaving the EU led to big movements in both currency and stock markets. Sterling has been under the cosh since June, but rallied strongly on the view that this ruling would create an environment conducive to more Parliamentary debate on the negotiations and therefore the possibility of a “softer” Brexit.

Overseas earners on the UK stock market have been a big beneficiary of the pound’s fall, so they bore the brunt of selling, while more domestically oriented companies rallied.

We now await a Supreme Court judgment in early December, so face more weeks of uncertainty.

Meanwhile, Theresa May ploughs on regardless, although one has to be concerned that there is a fine line between commendable tenacity and unhelpful obstinacy. John Wyn-Evans is head of investment strategy at Investec Wealth & Investment