Shares made a bright start to the year. A remarkable 6.4 per cent advance in January was followed by a strong February opening. Can such progress continue? I think not.
Do not misunderstand me. I still believe 2013 will be a good year for the stock market. But there will be inevitable hiccups that will create hesitation and hit sentiment. Monday's reverse illustrates the volatility investors will face. Even so the benchmark Footsie share index seems set to be much higher come the turn of the year.
The outstanding 2013 surge does not imply that the world's financial problems have been solved. There are a few hopeful signs and we all know that the stock market is pretty good at anticipating events. Yet the United States economy is still struggling and the fudge over the so-called fiscal cliff will not last indefinitely. The eurozone remains in a mess and Britain is making hard work of staging even a modest recovery.
Some argue that the flight to shares is the result of the Bank of England's policy of quantitative easing (in other words printing money). Tidjane Thiam, chief executive of the Prudential insurance behemoth, is reported to have complained about the "amazing distortion" created by QE. "What we are seeing in the equities market is the translation of the QE distortion because the money has nowhere (else) to go," he said.
And, of course, the Bank's low interest rate policy could also be fuelling stock-market activity while, at the same time, devastating savings rates.
Tom Stevenson, investment director at Fidelity Worldwide Investment and a former City Editor of The Independent, has concluded that since it was launched in 1984, the Footsie has often followed the January example.
The index has advanced in the first month on 18 occasions, including this year. And, interestingly, 14 of the 17 completed years have turned out to be positive for shares. On such a basis the odds must favour progress over the year.
Other factors that could help shares include the weakening pound – rotten for travellers but good for the nation's trading balance – and current stock market valuations that, despite the heady start to the year, are still far from excessive.
Still there is many a slip 'twixt cup and lip. There may be signs that the world's economy is on the mend with the bankers at last getting their act together and, hopefully, unlikely to provide any more unexpected shocks. But terrorism remains a worrying threat and it is impossible to forget the response to New York's twin towers bloodbath in the early days of this century. So, although the economic picture may be a shade brighter, and encouraging the stock market, there remains the danger that the unexpected could deal a savage blow to sentiment.
The share advance has been good for the no pain, no gain portfolio – 14 years old this month – with Whitbread climbing above 2.600p for the first time; standing at 2,629p at the time of writing. Booker, too, has achieved a 108p peak and Mears has edged nearer to its former high of 385p.
But I am disappointed that the laggards have failed to join the fun. SnackTime continues to be the dog of my share exercise. As I have said I have clung on for far too long and there is little point in selling with the share price so low. So I am stuck, just hoping for a recovery. Northern Petroleum has lost further ground but my two other loss-makers, Animalcare and TEG, have edged towards their buying levels.
I am growing increasingly concerned about Avation, the aircraft leasing group. There is a chance it will benefit from the merger between Australian airlines, SkyWest and Virgin Australia, but the shares keep slipping lower. Interim figures are due on Monday and I hope they will be good enough to offer support to the stock that has come down from around 120p to 86.5p. One reason for the decline is Avation's failure to live up to some of the profit forecasts flying around early last year. The portfolio paid 83.5p a share. Unless Monday's figures prove me wrong, Avation has entered a rather more subdued existence and it might be advisable to snatch what little profit is left.