15 January 2024, 08:37

By David Buik

It is generally felt that global stock markets’ performances are very often not an accurate barometer of economic activity. In fact, their behaviour is often erratic and occasionally illogical.

One only needs to look at the performance of the S&P 500 ( 24%) and the NASDAQ Composite ( 43%) last year, against a background of geopolitical unrest, rampant inflation, soaring global debt, stagnant growth, and diminishing profits to realise that investors took a calculated gamble on the back of the mushrooming excitement of ‘AI’ for the major advancement of the tech sector and especially the ‘magnificent seven’ (Apple, Amazon, Microsoft, Nvidia etc) to achieve the extraordinary gains made, especially in the US.

Investors paid a huge premium for future earnings and crossed their fingers in the process. Set out below is data reflecting the performance of the main international indices since the start of the year.

FTSE 100 -1.40%, DAX -0.74%, CAC40 -1.48%, DJIA 0.07%, S&P500 0.81%, NASDAQ 0.67%, NIKKEI 225 7.18%, HANG SENG -5.20%, SHANGHAI -3.05%, FTSE 250 -2.50%

Not only do investors have to digest the influence of day-to-day economic data, corporate news and earnings, but they also must add the vagaries of algorithm and programme trading and the power and influence generated by ‘AI!’

That alone represents challenging conditions. The current geopolitical imponderables, which continue to rear their ugly heads, further add to the complexity of investment decisions.

For a start, there are no less than 70 global General Elections this year. Putin’s election, we can take as a ‘slam-dunk.’ There is every chance that Trump will beat Biden in the November Presidential Election.

Were Trump to win, that could throw foreign policy into total disarray? Ukraine, Israel, the Red........

© LBC