You are here: Home - Investing - Getting Started - News -

Your five-point market panic button checklist

Written by:
Just two weeks in and 2016 already feels like the year of the bear. But investors shouldn't be rushing for the exit.

Here’s a five point market panic checklist from J.P. Morgan Asset Management chief global strategist David Kelly, to help investors keep a clear head.

  1. Is the downturn in oil and/or the Chinese economy enough to drag the US economy with it? No, the strength of the US consumer and the strong continued growth in the services sectors are enough to overcome the weakness.
  2. Are we near or in a US recession? No, US employment is still gaining. While markets are showing some late-cycle dynamics, the economy is decidedly more mid-cycle. Recession risk remains low. We’ve seen some signs of an industrial slowdown in the US, but this was largely down to the strong US dollar hurting exports. Importantly, manufacturing is a small part of the US economy and investors should focus on the much more economically important and healthier US consumer.  The US economy is like an aging marathon runner – it cannot run as fast as it used to, but that does not mean it is coming to a stop.
  3. Will earnings rebound? Yes, as the effects of a stronger dollar and low oil are gradually overcome. Since last year, investors have fretted that sluggish corporate earnings would drag down the markets, but there are solid reasons to expect a rebound. First, the energy sector, where much of the pain was, is busy consolidating and cutting costs. Second, the knock-on effects of a stronger US dollar hitting revenues have started to abate.
  4. Are interest rates low? Yes, 0.25% on the US Federal Funds rate and the Bank of England’s unchanged 0.5% bank rate are still historically low. Some investors worry that the December Fed rate hike takes the wind out of the sails for stocks – we disagree. Historical patterns show equities and interest rates rise together with positive correlation when rates are rising from a low base, as they are today.  A sharp rise in long rates could be harmful for stocks, but today’s environment of benign inflation makes that highly unlikely.
  5. Are valuations too high? No, they are right around to their long-term averages.


There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

PayPal closing down Money Pools

The ability to create new Money Pools will be disabled from 30 September, while existing Money Pools will be s...
PayPal closing down Money Pools

How to a write a winning property offer letter

You’ve viewed the perfect property but there’s likely to be stiff competition from other buyers. Here are five...
How to a write a winning property offer letter

BLOG: Get a personal MOT with your work perks

Thinking about exercising more, eating less or starting a new hobby in 2022? Before anything else, consider wh...
BLOG: Get a personal MOT with your work perks

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

Money Tips of the Week