As Wall Street pulls back from its all time highs, and the FTSE 100 struggles to pass previous peaks, equity markets are once again impacted by economic data reminding investors that the recovery is not straight forward. Tuesday's Alex cartoon in the Telegraph seemed to epitomise the continued nervousness, which depicts the lack of love for this equity bull market.
In the cartoon, two fund managers discussing at the bar how they are desperate to get hold of the cash sloshing around in the markets. As they chat about performance, the subject of league tables comes up. One fund manager expresses surprise as his friend at the bar has been attracting investors despite being at the bottom of the league tables. To which he explains that he is known as an uber-bear who is convinced the world is going to collapse, and he is receiving funds as savers use him as an insurance policy. In response to his friend replies with the view that everyone is secretly jittery worried that this current state is too good to last.
This caution is borne out by this year's fund flow data, money is coming out of cash, but so far this year, bonds have attracted more of this money than equities. This is despite the overwhelming belief from many quarters that bonds are expensive. Merrill Lynch recently reported their proprietary research shows that Wall Street's bearishness is still more extreme than it was in the lows of 2009. One wonders what will shake the world from this continued sense of fear.
One small ray of sunshine as the earnings season kicked off on Tuesday with Alcoa. In what is hopefully a portent for the weeks ahead they announced earnings well ahead of expectations. As the Greek philosopher Aristotle once said “one swallow does not make a summer”, but it does at least make an encouraging start.