Friday, 3 February 2012

Hoping for a happy ending to share price rise story

It’s too early to break out the Champagne but the recent strength of share prices on both sides of the Atlantic is very welcome and could prove to be a straw in the wind of recovery.
I’ve been away from financial journalism several years now having lost track of day-to-day events a week after my retirement such is the pace in the Square Mile.
But principles don’t change; stock market trends tell a story – the clever bit is getting the interpretation right.
Investors, who try to look three to six months ahead, are pretty positive at the moment.
Nasdaq stands at an 11 year peak, the Dow at its highest since 2008, and the S & P 500 has enjoyed the best start to a year since 1989. The Footsie is back up to a shade below 6000.
Better than expected employment figures from the US sparked today’s spurt, while there was some encouraging service industries' news on the UK front too.
It may be the buoyancy in share prices reflects recognition by investors that the gloom has been overdone.
Alternatively there will be some buyers who think shares might embark on a bull run later this year.
Either way we shouldn’t get too carried away. The real test comes when interest rates start to rise. The Fed, the ECB, and the Bank of England could stop the recovery in its tracks if they get their timing wrong.

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