David Prosser: Recessionary woes flatten the Footsie


Outlook: Close, but no cigar. For much of yesterday morning, the FTSE 100 flirted with its 2009 high, only for disappointing economic data from the US to prompt a modest sell-off.

It was a downbeat end to what was otherwise a strongly positive week, not only because the index failed to close above the 4,639 points it last achieved on 6 January, but also as the setbacks underlined just how fragile market confidence really is.

Indeed, the fact that investors chose to focus on below-par US consumer spending data, rather than the GDP numbers, which were actually better than expected, is in itself a good guide to how we might answer the obvious question about the market's bull run – its sustainability. The gains of the past 10 days (the past three months, in fact) have been based on improving sentiment rather than any tangible improvements in corporate earnings. Fair enough, naturally, to be more optimistic if you believe that better times for the global economy are just around the corner, but the trouble with sentiment-driven recoveries is they are hugely vulnerable to a dose of reality. Even the smallest bit of negative news has a disproportionate effect.

Stock market bulls have to hope that the V-shaped recovery that the British Government, in particular, is still forecasting does actually materialise. Markets anticipate economic events – conventional wisdom says six months before a recession ends is the moment to invest – but when that anticipation proves off-kilter, corrections can be sudden and sharp. Sadly, there is every reason to worry. The happiest conclusion we can draw from the data we have seen so far suggests that the recession is levelling off. There have been some green shoots, but there have been disappointments too. Certainly, there is no sign of the strong upswing for which the market is crossing its fingers.

Moreover, the window is closing. Markets have been rising for four months now, so two-thirds of that six-month lag time is up. If we don't begin to see data that is consistently more positive soon, investors will begin to question the judgements they've been making – and to reshape the equity market recovery into something more like the W or L that more gloomy analysts predict.

There's been plenty of talk recently about that familiar old stock market adage "sell in May and go away...", most of it about how investors who took its advice would have missed out. But remember we're only halfway through the period that the saying describes, with the second part of the adage, "...don't come back 'til St Leger's Day" advocating avoiding markets until mid-September.

The FTSE 100 was trading at about 4,200 in early May, about 10 per cent below today's levels. There's plenty of time for it to return to that level, and plenty of reasons to fear it might.

Suggested Topics
Travel
travel
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
News
Morrissey pictured in 2013
people
PROMOTED VIDEO
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Travel
travel
News
Robyn Lawley
people
News
people
News
i100  ... he was into holy war way before it was on trend
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
News
people
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Life and Style
lifeDon't get caught up on climaxing
Life and Style
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star