One of the questions that keeps getting pushed and pulled around in the market is whether this recent run in equities is coming to an end. Or, if not an end, then at least a pullback. This post here summarises that position and how commodities may be signalling a correction after registering their fastest climb in 40 years. See here for that previous post.

Summertime sadness?

However, the timing for that may well be still to come.‘Sell in May and go away’ is the saying that stocks tend to remain flat during the summer. It is a saying that is shown to be statistically accurate so the summer would be the logical time for such a correction.

Indices still set for gains?

The monetary conditions are just so easy right now. There are low-interest rates, high levels of Quantitate Easing, Central banks intervening to keep the yield curve low (RBA, BOJ, ECB?) and keen to be seen to not move before the Fed. The message the central banks want to give is that support will not be quickly withdrawn.

As long as any problems in stocks markets will only find support from both central bank monetary policy and Government fiscal stimulus the best approach remains to be ‘Buy the dip’. However, a significant risk here is that US 10 year yields keep rising on a faster than anticipated US recovery. This could cause a global stock sell-off.

The Nikkei is now also coming up to a very strong period from Mid March through to 01 May. It is well worth taking a look and may offer good value at market.