When global markets started to rally in March 2009, we were sceptical. We couldn’t see how the prob-lems kicking around the markets could have been solved, and we didn’t buy into the idea of the V-shaped recovery.
Instead, we worried about the ongoing semi-bankruptcy of the banking sector; about the suspiciously super-speedy growth in China; about the huge national debts accumulating across the West; about house prices in the US and UK; and, of course, about inflation.
Yet the markets kept rising – so much so that we had to start wondering when we would be forced to stop referring to the bear-market rally and start referring to the bull market.
No longer. In his latest letter to his investors, Hugh Hendry of Eclectica Asset Management notes times of historical change tend to be marked by “a clustering of debilitating events”. This was the case during the global collapse of 1929-1933. Then, as Liaquat Ahamed, author of Lords of Finance, puts it, we saw “not just one crisis but a sequence of crises ricocheting from one side of the Atlantic to the other”. And it seems to be just what we’re seeing now.
Think of the headlines this month – the Greek crisis; the ongoing falls in the Chinese stockmarket and renewed concerns about a Chinese property crash; the collapse of the euro; spiralling deficits forcing austerity drives across the world. That’s just the financial headlines. No wonder the bear market rally seems to have come to a pretty abrupt end. We may not be at a moment of “historical change”, but we’re certainly at a point where another crisis of some sort is less a possibility than an inevitability.
That’s something to remember before you get too carried away by this week’s horrible inflation numbers. The CPI may be approaching double the Bank of England’s target. But given the ongoing crises, to say nothing of the tax rises and spending cuts we can expect from June’s emergency budget, it would be a brave investor who’d bet on British interest rates rising this year.
Finally, some news for regular readers. I’ve bought a house. Yes, nearly four years on from the sale of our Paddington flat my husband and I are the proud owners of a slightly grubby Georgian townhouse. Given everything I say above and my long-standing views on UK property, I suspect it’ll turn out to be one of the worst financial decisions we’ve ever made.
But, thanks to Matthew Sinclair of Saint Property, our long-suffering search agent (can there be any-thing worse than helping a determined property bear buy a house?), we’ve bought a great house that will suit our family at a price well below bubble levels. As we hope to live in it for a good decade, we’ve decided not to worry about the fact that the only obvious way for its market price to go is down.