Markets seem very much in two minds as to the next direction. The FTSE and Dow are swinging wildly during each session first pressuring the upside and then the down only to revert to the up again.
The call this morning is for the FTSE to open at around the 4030 level off 15 from the official settlement at 16.30 yesterday but 50 points down from the futures close at 9pm last night. The index has made a series of attempts to trade down here over the past few days but there is definite support between 4000 and 4030 and we will probably need something new to actually break lower.
The idea that you should invest for the ‘long term’ seems almost laughable especially when you analyse the performance of equities since the current administration came to power. The major UK indices have not moved for 11 years and this is with the continual removal of the weak stocks which are replaced with the strong/new.
If you were lucky your portfolio might be worth the same as ten years ago but with transaction costs etc this would be unlikely. So how long is a long term investment?
Daily activity on the markets from our clients continues apace with solid trading levels every day. The varied market swings seem almost designed for contrarian day trading as every big move seems to have a significant reversal almost immediately.
Sterling continues to weaken overall. The GBP / USD cross seems to have found some support in the mid to low $1.37’s but against the basket of majors the pounds value continues to sink.
In July 2007 the GBP/JPY cross was ¥251.00. As I write we are trading at ¥122.00, an all time low. This is a drop of over 50% meaning that an imported Japanese manufactured product should be double the price of 18 months ago. Slowing demand on our high street is disguising the inflationary impact of the pounds weakness but this will be yet another worry for the future.
Unfortunately every factor seems to be working against the UK at the moment. The house of cards built by Messrs Brown and Blair is in danger of collapsing irreparably. The hope that a weak currency will somehow help to pull us out of the situation seems very old fashioned. We have to have a serious manufacturing base for this to be the case. With such a small percentage of our economy actually based on export manufacturing, and what we have still having to survive the global downturn, any hope for bonuses seems a long way away right now.
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'Spread Trading 23 Jan 09' edited by SD, updated 23-Jan-09
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