Morning Report Friday 1 August 2014
The Dow has fallen 317 points - where and what do we start buying?
Last night the Dow fell 317 points (1.9%), its largest one day fall since February, erasing all the 2014 gains to date. As I have discussed over recent months with the Fed slowly reducing its stimulus, I believe more days of volatility are ahead of us as a “free market” returns – see chart 4. The market is becoming concerned that the improving US economy will lead to the Fed raising interest rates sooner rather than later – see chart 5. The simple statistics are very clear:
The broader S&P500 (The US main benchmark Index) which is still up 4.5% for the year has gone without a 10% correction since 2011. It currently trades at 17.6 times reported earnings, near the highest level since 2010.
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