Hi, it's Paul here. I've just got back from a long weekend in Amsterdam, so am not yet operating at full mental capacity.

We're seeing rather dramatic volatility in the US markets, with a sharp correction underway. I'm sure members will want to discuss this here, as well as our usual small caps stuff. So please post away.



Hi, Graham here!

Paul needs a break after his trip to Amsterdam.

Let's see  what's happening in the markets:

5a798a8be8003Index_20180206.PNG

Following on from the FTSE's weak performance on Monday, which preceded Wall Street's biggest one-day drop ever (in terms of the number of points), the UK market is now firmly back within last year's range:

5a798b5b4e357FTSE_100_20180206.PNG

As you can see, we are still quite far from making any long-term lows. All that's been lost is the gradual progress higher achieved last year.

Most people (including myself) view the US as being the most overly extended market, so the correction should be the most dramatic over there.

Technical "support" for the FTSE is coming up soon at 7100. Below there, not much until 6500-6600:

5a7992ec0a9d5FTSE_tech_20180206.PNG


Investment-related companies are some of the biggest fallers today:

5a7993a2edfe3Fallers_20180206.PNG


What's going on?

Last week, the US posted rising average hourly earnings, firming up the belief that the federal reserve would raise interest rates another three or four times this year to stave off inflation.

Expectations of rising rates had seen the 10-year US bond yield on the march higher for the past few months:

5a7994ee9c257USD_10Y_20180206.PNG


The bond markets are much larger than the equity markets. If acceptable yields can be achieved in the bond market, such as 2.7% from a US 10-Year T-Note, then conservative investors would be much happier over there rather than in high-risk, overvalued equity markets.

Some people think that T-Note needs to hit 4% to be a serious drag on equities, but merely getting close to 3% was sufficient to create yesterday's huge sell-off.

Depending on how you measure it, we just had the second longest bull run of the last 100 years. Investors may have been lulled into a false sense of security by extraordinarily calm conditions in equities, where even a…

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