Few other strategists are quite as bearish as Mr O'Neill but as evidenced by yesterday's falls in bonds (down a full point), the FT-SE 100 (off 47.6 points) and the Dow, sentiment is beginning to turn distinctly nervous. The FT-SE 100 has fallen in eight out of the past nine trading days; everything in the way of economic news has tended to be of the worrying nature, from Monday's rise in interest rates, through Wednesday's worsening inflation outlook to yesterday's higher than expected public sector borrowing figure.
The London market always seems to perform poorly in September and it may be no more than that. But as Mr O'Neill points out, the yield on the Dow at about 2.5 per cent has rarely been lower in the 80 years the index has existed. The last time was just before the crash of 1987. We were at a different stage of the economic cycle then, of course.
None the less, the American market, hyped by bid fever, is beginning to look overvalued in the extreme. It seems unlikely that what is left to come by way of recovery in US corporate earnings can justify present valuations. Mr O'Neill is possibly being a little too gloomy, but this does not seem like the best of times to be committing new funds to the stock market. The Government is going to have to pay through the nose for its 11-year money at next week's gilts auction.Reuse content