Monthly Market Report - March 2018

1st March 2018

At long last. I think it is fair to say that we’ve all been collectively waiting for some kind of nasty market correction for what has seemed like an age. The trail of breadcrumbs was always clearly on display. One of the primary supports for equities over the last decade has been accommodative monetary policy and low interest rates. This has allowed debt levels to carry on increasing – in fact there has been $72tn ($72,000,000,000,000) of new debt created since 2008 taking global debt to over 327% of GDP. But that extra liquidity has also supported share prices. So, when interest rates started to increase – helped along by worries about resurgent inflation – it wasn’t any surprise that we saw market volatility. The only surprise was why anyone thought it wouldn’t happen. A good summary of where we had got to come from risk analysts at CheckRisk who observed that "In January equity markets globally had become extremely overbought, both on a valuation basis and also from a technical perspective with relative strength indicators (RSI) of greater than 90 recorded. These are at the absolute upper bounds of what we have seen."

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