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My dad invested his pension but he’s too ill to handle it any more – what can we do? Can I get broadband without a landline? Are stock markets about to crash? Read this: Are stock markets about to crash? Doomsayers might be warning stock markets are dangerously overpriced, but new analysis of five top financial indicators show all are flashing ‘green for go’.
Investors are enjoying a new year bonanza, as London’s top FTSE 100 index notches up fresh records and Wall Street repeatedly hits all-time highs in the wake of massive corporate tax cuts in the US. Yet many financial experts warn we are riding for a fall, after an amazing bull run. So what’s really looming for markets? Russ Mould, investment director at AJ Bell, says: ‘There are five lesser known indicators that can be used to judge whether markets are rightly bouncy, or becoming dangerously bubbly to the point of bursting. What should you invest in now? We take a look at why these indicators – including transport, copper and volatility – are currently saying the future direction of markets is positive.
Skyscrapers, the fear index, hemlines and burgers: Which money indicators to follow There are a whole host of indicators that keen market watchers keep tabs on to tell them what might be around the corner. They range from technical measures, like the Shiller ratio or margin debt level, to the wacky, like the hemline index and something known as the headquarters curse. But still tread carefully, because Mould cautions that the very fact they all look rosy could be a bad sign in itself. After what is now almost a nine-year bull run in UK stocks, even that could be a reminder of Warren Buffett’s aphorism that the right time to be fearful is when everyone is greedy and the right time to be greedy is when everyone is fearful, and right now there is little, if any, fear in evidence. The old theory goes that if the transports are not performing, the industrials can’t either, as if nothing is being shipped, nothing is being sold,’ says Mould. It is therefore reassuring to see both the FTSE All-Share Industrial Transportation and America’s Dow Jones Transports indices powering higher, to offer a “green” signal to global stocks.
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Should investors worry about political upheaval? Will President Donald Trump prove to be good for investors? Is now a good time to buy emerging markets? Can investors make money by keeping it simple? Where should you invest and what should you avoid after Brexit? Market minnows are an excellent indicator of risk appetite – they tend to outperform when investors are bullish and fall faster than the broader market when they are bearish,’ says Mould. The UK’s FTSE Small Cap and America’s Russell 2000 both continue to make solid progress, even if the megacap FTSE 100 and Dow Jones Industrials are grabbing all of the headlines.