Morning Report Wednesday 8 October 2014
Beware history as the IMF smashes equities with negativity
Last night, the Dow tumbled 273 points (-1.6%), to its lowest level since August after the International Monetary Fund (IMF) cut growth forecasts and warned of “frothy” equities, amid signs of slowing growth in Europe. According to the IMF, the sustained period of interest rates near zero in advanced economies has raised the risk that some financial markets may be overheating – not a major surprise to most I would have thought!
My area of concern is the warning comes 3 months after the US Fed said prices were stretched in some of small-cap and biotechnology shares. Since then, the Russsell 2000 (small cap index) has fallen 6.5%, while the S&P has only fallen only 1.9%. For the year the S&P is up 4.7% and the Russell 2000 is down 7.5%.
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