This is no time to get off the equity train Marke

This is no time to get off the equity train
Markets have their own momentum, and they can hurt. At present, stock markets continue to charge up-hill. That is good for those who are on board, but horrible for anyone who has gone out of their way to diversify. Diversification looks bad when it turns out you don’t need it.

The reasons for the progress of stocks are well-documented. A recent improvement in the data from China has helped to calm nerves, a small but meaningful possibility of a political catastrophe in the US has been averted, and the earnings season for the third quarter in the US has not produced any surprises ugly enough to stop the momentum. Profits for the S&P 500 companies to have reported so far are up only 2.4 per cent year on year, according to Thomson Reuters – but once JPMorgan, which made a loss thanks to litigation charges, is excluded, this rises to 4.9 per cent.

Behind all this, the logic of the last five years persists. The economy is not so bad that profits will collapse, but weak enough to force the Federal Reserve to keep intervening in the bond market. That effectively forces investors to buy stocks. The US jobs data for September were disappointing, leading many to push further into the future their forecast for the date when the Fed will start withdrawing its stimulus. That prompted buying of stocks. http://www.cnbc.com/id/101143125