Bubble warning: Five indicators to watch out for
11 Aug 16
As the old strategy of “sell in May” has proved a failure thus far in 2016, Russ Mould, investment director at AJ Bell, looks at five indicators investors can use to judge whether there are further gains to be made or whether markets are entering bubble territory.
“Volatility can be the friend of the investor – it can provide chances to sell stock expensively or buy it cheaply – but history shows that stock indices progress best when they make serene progress and a series of modest gains and tend to fare less well when trading is choppy and there are big swings up and down.
After five straight days of open-to-close movements of more than 2% in the aftermath of the referendum vote, the FTSE 100 has moved forward quietly, with minimal fuss.
This calm is to be welcomed, especially after 27 open-to-close movements of at least 1% in January and February alone, the choppiest start to any year for at least two decades. Further peaceful gains, in incremental steps, would further encourage this is a bull run and not some frenzied bubble that is primed to burst, assuming historic trends repeat themselves,” he said.
Tags: Investment Strategy
