Seriously. Like they are right now. Two hundred and how ever many years of history tells us that equity prices typically rise 10 per cent a year, in non-real terms.
Just recently it’s been 3 per cent or 5 per cent or maybe 10 per cent — up or down, seemingly at random. The swing, trough to peak, that we saw on Wall Street on Thursday stretched to 11 per cent. A move that was swiftly followed by a 3 per cent “correction” on Friday.
On current trends - Friday afternoon, London time - that should/could put the Dow Jones, say, 400 points higher at the close?
Clearly, no one knows how to value stocks. But given the maturity of these markets, the number of market participants and, er, the raw intellectual firepower focused on the issue, we hanker after a more sophisticated explanation.
Cue an executive drive-by at FT Alphaville HQ featuring the paper’s chief economics commentator, Martin Wolf.
I suspect it is simply down to a lack of liquidity. Those traditionally charged with providing liquidity - the market makers of old - are not making markets.
So, rather than too many buyers or too many sellers, it’s ‘not enough buyers or sellers.’
Sounds like a fob-off to us.
Might be accurate, though.
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