What investors forget – correlation!!!

It’s really hard to miss the recent global stock market crash unless you’ve been living under a rock.

For all investors wondering if they had missed an opportunity to participate in the stock market rally in the last couple of months, a peek into the charts of some equity benchmarks should provide a relief.

S&P 500


Nifty 50


FTSE 100


Nikkei 225


Let’s throw in another emerging market chart for good measure…



Charts Source: Bloomberg

What you’ll notice is that all of these markets have been driven higher over the last year, finally hitting all time highs in late January 2018.

Before deciding on investing in equities or for that matter in any other asset class, investors need to remember that global markets are highly correlated and what started off as a rally in the US stock markets post Trump’s victory in November 2016 quickly spread to other equity markets over the course of 2017. And the market fall has been just as contagious. The correlation between equities and bonds can be for another post.

Most markets indices are trading above their long run average PE and investors will need to look for specific stocks in order to find value.

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