While the general public struggled with lack of political progress around the world, most western stock markets reached new highs. Fitting that this happened as we passed the 10th anniversary of the pre-GFC (global financial crisis) stock market highs.
On the political side, it was frustrating to observe that the two sides of the Brexit negotiations still appear to be focusing on their differences, rather than trying to establish coming ground in order to move forward. Similarly, in Spain, the Catalonian regional government and the Spanish government in Madrid exchanged tit-for-tat threats, rather than following the explicit wish of their population to engage in talks to find a better solution. For the time being, the Catalans seem to want to avoid having their very own ‘Brexit moment’, and so the optimists will be hoping for de-escalation over the coming weeks. Over in the US, president Trump’s keenness to reverse as much of Obama’s reconciliation deal with Iran – as well as his Affordable Care Act (ACA/Obamacare) – is equally frustrating.
For investors, it is therefore more uplifting to focus on the world of the actual economy, and the companies whose shares we invest in. Against the aforementioned historical and present stock highs, it is worth reflecting on both, and exploring what they tell us about the likely future course.
More cautious investors were keen to focus on the 10th anniversary of the previous market peaks for both the S&P500 and DOW Industrials. Back then, the Dow hit a record high of 14,000 and President George Bush Jr was on TV stating the US had a “vibrant economy”. As we now know, that peak was followed by a fall of more than 50%, as the financial crisis later gripped the world.
