These are very odd markets. The abrupt falls in share prices this year could be the usual typical January and February declines after the year end surge, or they may be about to make those forecasts, widespread, that the FTSE-100 will hit 7,500 by the end of 2014 look rather silly.
I was talking to the head of a large UK company with much of its business in the US, who spends a lot of time there. He made an interesting point. US shares are valued even higher than the London market, to the extent that US investors are running scared. They know those valuations don’t make sense.
They are equally spooked by emerging markets, for obvious reasons. They are looking towards Europe for value. His share price tends to react favourably in the afternoon, London time, as US investors come in.
This suggests two things to me. UK shares may continue to see some support from US buyers seeking what they perceive as value. Until interest rates start to rise, quantitative easing tapers off further and bond yields return to “normal” levels.
Then that support may evaporate. And as we know, when such reverses take place, they take place very quickly indeed, and the effects can be alarming.
Tom Paines Bones 