Global stock markets have been on a bull run for almost 10 years. Analysts and investors, without the benefit of 20:20 vision, now ponder for how long more might this Bull Run last.
Investors requiring short-term access their funds are faced with a dilemma. Do they withdraw funds now and place them in cash delivering zero returns? Do they hang on, hope there will be more growth in markets and then get out before the next big fall.
Predictions about the end of the Bull Run have been around for more than 4 years now. Professional fund managers, no less, have been guilty of reducing their exposure to equities as long as four years ago and increasing their cash holdings.
This caused an inevitable impact on their funds’ investment performances especially as global equities have grown in three of the last four years. Their dilemma now is, if equities were too expensive four years ago, when will they will be cheap enough to get back into the market?
There seems to be a consensus building that equities could continue to grow for another year or possibly two. That consensus is based on The US consumer and the US – China Trade war.
Since Donald Trump came to power, the unemployment rate in the USA has fallen; tax cuts have found their way down to the general population and consumers are feeling bullish. US consumers are the key factor in economic growth because consumer spending accounts for 70% of US GDP. Retail in the US is very dependent on sales in the 4th quarter of the year.
In 2018, retail sales bucked the trend and fell sharply, putting retailers and suppliers under pressure. Analysts are predicting a return to normality this year.
Trade war tariffs have increased prices with the potential to reduce sales. However, the recent cooling off in hostilities between the US and China, with further action being delayed and discussions beginning for a ceasefire are undoubtedly related to the upcoming Presidential election. The incumbent President will not want to do anything to hurt the US consumer before the election.