Remember September
By Richard Hunter | 01 Oct, 2008
Astonishing times.
If there is anyone who has worked in this industry and has seen one month like the one we have just had, they have not yet made themselves known.
It feels as though several decades of market lurches, twists and turns were squeezed into the one calendar month of September.
This is one of the reasons why the bulls have gone into hiding, and also why nobody is prepared to make a call on where the market may go next – and when. In fact, the bears are having a ball at the moment, with one reasonably well-known pessimist calling the FTSE100 all the way down to 3000 in the near future.
In some perverse psychological way, this could actually be good news. Many market gurus over the years have made the point that the darkest hour is before dawn, and that when the market seems to have capitulated and only the sellers can be heard, that could well be a turning point.
One thing which is eminently possible – difficult to see at the moment since there are so many concerns which need to be resolved, not least of which the US bailout – is that as and when the market recovers, such is the nature of markets at presents, it should recover quickly and powerfully. We have made the observation before that this could resemble something of a coiled spring, and by the time it is clear that the market has turned, many of the real bargains will have been missed.
This is not to suggest that we are currently at that stage – after all, the UK economy is clearly looking at tough times ahead, indeed the volatility experienced in September does show that there is no way of knowing how markets will move in the short term. The UK market will get into recovery mode before the real economy does, since it is forward looking in nature and tries to anticipate future developments.
For those investors with a strong conviction and an eye for quality stocks, however, what we may currently be witnessing is an undervaluation of certain shares which is nothing short of exceptional for long term investors.
