By Simon Angelo
There is a lot of talk going around that when it comes to world stock markets, particularly in the US, we're now in the longest bull market in history. We're due for a major decline, even a crash! As a stock picker, this predictably makes me a little nervous, particularly as I know we've had a good run. However, as with all fear, you need to think about it clearly and understand where it's rational, where it's not and where it's being used by journalists to glue anxious eyeballs to their posts.
The facts - then and now
It is true, some stocks have become very expensive. It's also true that there are geopolitical factors at play impacting on world markets, more than usual. There's Brexit and ongoing migration pressures weighing on the EU, not to mention Trump's cut and thrust approach to navigating his trade deficits. However, none of these seem as insurmountable or widespread as the credit crisis of 2008, the dot com crash of 1998 or 1987's Black Monday - which resulted from a heady cocktail of overvaluation, deficits, computer trading and illiquidity.
Continuous demand in the markets
We're now in much more uncommon times. Interest rates are about the lowest they've ever been (and look to remain so for some time). There's more people than at any other time in history living on unearned income and reliant on fund investments. The world is liquid and awash with inexpensive money. With property investment becoming less attractive due to high prices and government curbs such as foreign buyer bans and stamp duty, investors continue to turn to stock markets.
You can see this with each passing day on the trading screen. When there's a strong dip in a value stock, it's followed quite quickly with a spike in buying, pushing it back to where it was.
Amidst this backdrop, a prudent focus is to be very careful you don't buy anything that might be overvalued and to favor defensive businesses that produce (and yield) good income. Strategically you also want to buy some good dips, either in stock price or currency. A good company is a good company for the long term regardless of what happens to the short term stock price. In my view, any major downturn will be short lived and long term investors in quality will do well.