It’s a six-year high in Tokyo for the Nikkei. Celebration runs rampant. Reaching its biggest annual gain in over four decades, the index moved up 57% in the last 12 months. Prime Minister Shinzo Abe can take a lot of credit for this milestone due to his aggressive economic stimulus.
Shinzo Abe, Japan’s Prime Minister, says, “This year, the year of the snake, this means to start, to shed and begin anew. The previous year of the snake was in 2001, the year we began the 21st century. This year, the Tokyo Stock Exchange had a fresh renewal as well.”
Though a feeling of satisfaction lingers at the Frankfurt Stock Exchange thanks to its six-year high, but it’s taken a more sober appearance. Close Brothers trader Oliver Roth adds a few words.
Oliver Roth of Close Brothers Seydler Bank AG, says, “The DAX celebrated its 25th birthday this year and it also almost gained 25 % this year. This was clearly more than most people had expected including myself. The main reason for this was the high liquidity in the market.”
The easy money policies of the Federal Reserve and ECB helped to support this liquidity, even if tapering is hitting bonds. As prices slip, yields on ten-year U.S. Treasuries are approaching two-year highs. Tom Vosa, National Australia Bank Head of European Markets elaborates.
Vosa says, “We are looking at a normalization of yields. We have further to go, and I think next year will be another bad year for bond markets, but this after all is a long overdue correction from what happened in incredibly bullish markets since 2007.”
Rightfully so, investors wonder if they should still indulge in stocks. However, many others believe these good times will continue… at least for now.
Oliver Roth of Close Brothers Seydler Bank AG, says, “Those who are already in, should stay in, because it seems that this will continue for a little bit. Those who are not yet investing in shares shouldn’t start to invest now because if we look one or two years on, we are at a very high level and the risk of it falling is 50 or 60%.”
Year 2013 is the Snake, and the Horse reigns in the year of 2014. Money decisions may speed up to a gallop, per horoscopes. But investors should remain wary of a possible fall. So, hold tight.