Good morning!

I'm starting to notice patterns in market behaviour in these more nervous/volatile conditions of late. Whenever there is a large sell-off in the USA, then the Futures seem to gradually recover the following day. Also, you see very little selling in UK small caps - no sign of panic at all today for example, even though the Dow dropped 465 points from its peak yesterday.

I find that rather encouraging - it suggests to me that UK small cap investors are committed to their shares, and not easily panicked. Although I have noticed very low volumes being traded in small caps on days like today - so it seems that buyers go on strike, rather than there being any meaningful selling on days like today. You can't dip in & out of small caps anyway, as the bid/offer spread will destroy your returns.

With a lot of positive newsflow and results being issued at the moment, this still feels like a bull market in small caps, even if the big Indices are struggling - a lot of which is due to particular sectors, such as oil/resources, and banks. So I think it's best to sometimes detach from looking at Indices, and focus on which sectors are under pressure, or doing well.

Overall, with the economic situation looking fairly positive here in the UK, and in America, and with signs of recovery in Europe, this doesn't strike me as a time to be particularly worried about macroeconomic things, any more than usual anyway. Cheaper oil is great news for most people, and most companies...

Petrol - disposable income

Some interesting read-across from big cap results today. WM Morrison Supermarkets (LON:MRW) interim results are not great, as expected, but I note that fuel sales are down 16.8% to £1.6bn. That is mostly due to the lower price of oil feeding through to the pump. So if we assume say 2% is due to lower footfall (carfall?!) and the remaining 14.8% is price deflation, then I make that a £278m "tax cut" for people who bought fuel at Morrisons in H1, or £556m p.a. I've no idea what market share Morrisons has for fuel, but for the entire market we must be looking at multiple £billions in extra disposable income in the pockets of the UK consumer. This has to be positive for consumer cyclical shares…

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