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Global high-yield spreads were up 40 to 50 basis points, the S&P 500 had lost more than 18 per cent since the beginning of January and more than 12 per cent in one month, and Google had a spike in searches for the term "recession". Ah, the R-word. The Nordic stock markets fared somewhat better, though, not least because the Norwegian market was supported by the strong oil price.

Then, from the gloomiest days of May, high-yield spreads came in by some 20 basis points, and global stock markets rose by up to six per cent. The yield on 10-year US government bonds, having shot up by almost a quarter of a percentage point early in May, actually ended the month lower. Chinese lockdowns eased a bit and the spectacle of inflation and devastating interest rates seemed to have faded a bit.

A sigh of relief? Well, obviously.

A turning point? The very moment when the market finally realised it would not suffocate on inflation, hawkish monetary policies and perhaps recession?

I'd love to be able to answer in the affirmative. It would be a sweet guess. But I need to admit that it would be a presumptuous mistake. Financial markets have an infinite number of turning points. The closer you look, the more "turning points" you'll find. With millions of investors constantly looking for clues, there are always numbers or arguments to be found in support of whatever hypothesis you have. That's why we have volatility. Definitive arguments are few and far between.

With stock markets, we really only know this: The long-term trend is up. In the interim, prices will oscillate considerably. And every little turn reflects somebody's opinion that the market is going this way or that.

To the extent that such opinions get to be broadcast, you may be well served by treating them as noise. That doesn't mean that they are silly. They may be profound and reflect thorough knowledge of financial markets and the economy. It's just that there are limits to what we can possibly know about the future.

If you find that inordinately scary, you have probably foregone a whole lot of financial returns.


 Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on, market developments, the portfolio manager’s skill, the fund’s risk profile, as well as fees for subscription, management and redemption. Returns may become negative as a result of negative price developments. This is marketing communication.



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