First published: Prospect Magazine, 23/01/2014
Bad economic news could still be good news for the markets
Equity markets in developed economies had a second consecutive banner year in 2013 with markets up around 10-15 per cent in Europe, 25 per cent in the US, and about 50 per cent in Japan. Most strategists think that markets, which have been rising for five years, have further to go in 2014, with expectations of around 10-15 per cent for equity market returns. They may be right—or even too cautious—but if so it’s important to understand why, because stock markets are much less about robust economic fundamentals—the health of the economy according to particular indicators—than about how much cash is available. Central banks in the US, Japan, Europe and…“more:”