Are stock markets near all-time high?

Are stock markets near all-time high?
17 April 2012

STOCK market investors might finally have something to celebrate: during the first half of March, the US market looked set to hit an all-time high.

That turned out to be a little premature, but the Dow Jones Industrial Average nevertheless set another 52-week and multi-year high on 15 March. To top this, you would have to go back to 2007.

The index finished the month at 13,212, up 8.1% for the quarter. The Dow has more than doubled since its lows of 2009, and is now less than 1,000 points and 7% from its all-time high. This shows how far we have come in the three short years since the market bottomed in March 2009.

Volatility on the wane

The lack of volatility also continued and there was only one +/-1% day, and no 2-3% days during the month.

In fact, volatility has declined steadily since the fourth quarter of last year.

The VIX (a measure of volatility) ended the month at 15.5. To find a lower reading than that, you’d again have to go back to 2007.

Britain’s stiff upper lip

Across the Atlantic, the positive mood also continued through early March, albeit slightly more tempered.

UK markets greeted Fitch’s shift of the nation’s triple-A rating from stable to negative outlook with a stiff upper lip.

Despite the ratings agency gesturing towards ‘very limited’ fiscal space available to absorb further painful economic shocks, market reaction was broadly calm.

Economic worries

However, the last week in March did not follow the prevailing trend as concerns about the outlook for global growth re-emerged.

In the US, fourth quarter gross domestic product growth came in at a robust 3% on an annualised basis, but more recent data has stoked concerns that subsequent quarters will not see this sustained.

Initial US jobless numbers came in higher than expected during March. The unemployment picture has generally been improving in the US and, as such, this has been one of the main drivers of strong global equity performance, so investors don’t welcome any signs that this improving trend is stalling.

Meanwhile, retail sales in Germany fell by a larger-than-expected amount in February, confounding expectations of a gain.

Strong oil price

A possibly more pressing concern for consumers in the US and UK has been the strong oil price, which translates into higher fuel prices, reducing the money that people have to spend in other areas.

In the US, motorists are increasingly complaining about petrol prices, which on average are nearly a third higher than year ago. In the UK, motorists have been panic buying due to the UK government telling the public to stock up in case of tanker driver strikes.

Despite this, the oil price fell amid reports that the US and Europe were considering releasing some of their strategic reserves and assurances about supply from the world’s biggest oil producer, Saudi Arabia.

Regular investing

All in all, the month started very positively and finished on not such a high point. For those investing on a regular or monthly basis there is still fantastic opportunity if channelled through a well-diversified portfolio based on the theory of dollar-cost averaging.

An investment strategy that can be used with any currency, it takes the form of investing equal monetary amounts regularly and periodically over specific time periods, such as $1,000 per month.

By doing so, more shares are purchased when prices are low and fewer when prices are high. The point of this is to lower the total average cost per share of the investment, giving the investor a lower overall cost over time.

Pic credit: worradmu/

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