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Holly's Blog: The stock market ride

29 May, 2020

Markets lurch upwards this week and FOMO sets in for those in cash.

Markets lurch upwards this week. In the US, the S&P 500 index of mainstream big brand shares is up more than a third from its low two months ago. In fact the index is just 10 per cent below the record high it reached back in February.

Although there are lot of sceptics who think this is all a bit, well, unnatural and driven by the Fed pumping in money and people displaying over-optimism about vaccines and “back-to-normal soon!”, these sceptics sitting on the sidelines of this ride are of course only human. And there is a rather hardcore Fear Of Missing Out when you are the only one in cash. And everyone else is strapped in.

Nearer to home and the FTSE is about 6% down now if seen over a 3 month period. And about 20% from its record highs in January.

It’s always interesting to look under the bonnet of this rollercoaster and see which firms are doing relatively well – and which ones are being hammered.

Poor old Carnival has had its engines turned off and discos silenced with a 50% fall over the last 3 months. Despite a desperate blast of the kazoo this week with a 20% jump, it’s still suffering and likely to be rudely elbowed out of the FTSE100 next week when the members of this weighty club are reviewed.

Also likely for the FTSE chop is EasyJet – another short-term (?) victim of the virus but also one which has got the day traders’ juices flowing, rising by 29% in the last month alone.

As well as travel, oil companies have been given a kick and both Shell and BP are in the doldrums, with plenty of red on the charts both over the last month and the last three months. No rally here, and cut or threatened dividends give another kick to these already wounded creatures.

Burberry – that symbol of luxury goods – is up 14% over the last month; Unilever – makers of Dove, Surf and Magnums – are back where they were three months ago and up 6% over a month; Persimmon – a key house builder – is also up 6% over the last month. And Diageo – purveyors of booze – have not even fallen if we look back over the last three month period.

So there you have it – life as summarised by the stock markets. We’re not going on holiday. We’re not using fuel. But we’re keen to get out of our houses or into a different house, we’re buying fancy clothes, washing our hands, stuffing Magnums and solidly and consistently glugging the Johnny Walker.

These markets are gung-ho and it’s a little like watching a fairground ride hurtle past – but this one isn’t going to slow down to give anyone a chance to get on-board in a dignified manner. Whether the euphoric traders or the more cautious money managers are right remains to be seen. And frankly, from where I’m sitting, it’s anyone’s guess what the next 6 months hold. We used to say that markets were driven by Fear and Greed. I think that’s still true – but in the age of social media, it seems we need to add the more modern FOMO as a third behavioural driver for the Instagram Age.

Planning a lovely trip to Faro this weekend – I need to get my eyes tested as a matter of national urgency and there’s an optician right by the sea. And then I will return mid-June at which stage I’ll be forced into selfless quarantine for 2 whole weeks having accidently forgotten to take my children with me. Oops!

Have a lovely sunny weekend all.