Monthly Market Report - October 2018

1st October 2018

Regular readers will know that I tend to take a slightly cautious attitude towards investing at the moment. It strikes this observer that there’s never been a better time to think about defensive strategies – be they using structured products, absolute returns strategies or just good old fashioned hedging. Nevertheless the hard numbers suggest that my caution is misplaced. The bull market rally looks to be in fine form and showing no particular signs of distress. Only a few weeks ago for instance Deutsche Asset Management released a note which suggested that since March 9, 2009, global share prices have risen without a fall of at least 20%, thus fulfilling the usual definition of a bull market. "After more than nine years, the question of the life expectancy of such a bull market naturally arises” observes Deutsche, "the current bull market is now competing with the previous record holder in terms of length”.

The chart below also shows that this may not only be the longest bull market, but that it has also performed well in terms of price development compared to its predecessors. This is all the more, remarkable, says Deutsche "as economic growth in the current economic cycle, which also began in 2009, falls well short of previous cycles. However, the corporate sector has adapted better to the weak overall economic development than other sectors. Current share prices are underpinned by comparatively high corporate profits. That's unlike the situation in the late 1990s. "

What next for the bull rally? According to David Bianco, CIO Americas at DWS, the 1990 bear market was at best a small bear with a decline of just under 20% - Bianco suggests that in fact the bull market of the 1990s began after the 1987 crash. According to this definition, we would have to be patient until June 2021 until the current bull market also sets this record

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