- Many of history's equity booms have had nothing to do with the 'fundamentals'.
- The market rallied 254% and provided a staggering 367% total return from 1924 to 1929 (chart). How many times were the fundamentals characterized as quicksand before the market crashed in October 1929?
- Capital flows, driven by human behavior, often trump the fundamentals for extended periods; the opportunity cost of not recognizing these periods can be exceptionally high.
Chart: Large Cap Stocks Capital Appreciation Index (LCSCAI), LCSCAI to Gold Ratio (LCSCAIGOLDR) and LCSCAI Cycle Z Scores (LCSCAIC6 and LCSCAIRC8)
Headline: No saviour in sight as world credit cycle rolls over
Any country that has failed to lock in a self-sustaining recovery by now must expect to pay the price for the failings of its policy establishment, and some risk a slide into outright deflation.
“We see building evidence of a cyclical downturn,” said Fredrik Nerbrand, HSBC’s global asset guru. “We find it highly troubling that the eurozone is still marred in a recession at the same time as our cyclical indicators appear to have peaked.”
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