Consensus expectations for equity markets next year remain high, based on a combination of low interest rates and continuing recovery in economies. In the short term equity markets continue to drift lower for what appears to be no other reason than traders are prepared for a year end rally that is so far failing to materialise. Another contributing factor maybe equity Investors have had good returns this year so far and may be reluctant to chase performance into the year end. There does not appear to be any real catalyst for the correction, apart from the usual increase in speculation that the Fed will taper the bond program after the stronger than expected manufacturing data yesterday. The next and last Fed meeting of the year takes place on the 17th and 18th of December. On Friday the US release monthly employment data, depending on the outcome of the report that could lead to further speculation. I have no reason to see why the Fed would resist all year to taper and then act in the last month of the year. The ECB likewise will probably leave any new initiatives to stimulate the euro zone economy until the new year. Gold keeps grabbing the headlines as it has now fallen back to $1200 an ounce, the stronger dollar and rising bond yields reducing gold's lustre.
The FTSE 100 had another bad as the index fell 60 points passing through the 50 day moving average and trading towards the 200 day average of 6500. No markets rise in a straight line and as I say before these corrections often provide useful opportunities. The FTSE 100 correction in the last month has been in the order of 5%. Those who study these things expect bull market corrections in the region of 6%, as we reach technical support levels and a healthy correction, I hope the pre Christmas rally may not be too far around the corner