Market turmoil 'detached' from reality

Market turmoil 'detached' from reality

The broad-based sell-off in markets is a result of a variety of factors, says Instreet Investment, but may ultimately be “detached” from economic reality.


Instreet Investment managing director George Lucas noted that the recent sell-off in equity markets is a result of numerous factors, including monetary policy, regulation and oil prices.

“We should probably also throw currency wars into the mix along with the over-reliance on central banks (rather than fiscal policy) for economic management,” he said.

However, Mr Lucas argued that the “slump” in equity prices is seemingly detached from economic reality.

“Although there remains the possibility that the turmoil will drag down economic activity, recent numbers are not pointing to a recession."

Mr Lucas said consumer confidence in the US is holding up despite the falls in equity markets. Further, he indicated that retail sales in the US increased 0.2 per cent month-on-month in January, a better result than expected.

“As for the eurozone the 0.3 per cent fourth quarter gain in GDP came as something of a relief after the weak tone of recent data and business surveys.

“The numbers show that Europe did not slow down in the last half on 2015 and there are no signs of recession at the moment,” Mr Lucas said.

Mr Lucas also commented that there has been “relative stability” in commodity prices over the past few weeks.

“With demand for safe-haven assets up, precious metals (led by gold) have surged. Industrial metals have also held up well and the price of Brent crude oil is still above its January lows, despite slipping back recently.”

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