I checked the charts of major markets just now and it looks as if we have a major breakdown. Tokyo and  Hong Kong are down massively. The DAX in Germany (my home market) which is extra volatile, is down more than 3 % today and has broken decisively through the important 9,500 level  to about 9,300. To me it looks as if this might turn into a more than mild bear market.

Please give my regards to David and tell him that I thought the seminar two days ago was a real treat and added to my knowledge and understanding.

And:

Hi David, I know that I am not alone in struggling to make sense of the markets at the moment. Your perspective remains sane, measured and rational (as usual). However, recently it seems that more and more market watchers are coming out with cataclysmic predictions about what this year may hold in store and what simple private investors like myself should do with our portfolios. I am aware of your current views on markets as I follow your comments avidly, knowing that you have played a big part in guiding my financial decisions for the best part of 15 years. Best wishes to you and Eoin 

David Fuller's view

Many thanks for your emails which express the concerns of many other investors.

We were living with a choppy market environment but the start to 2016 has been shocking and created more uncertainty than we have seen for several years.  I maintain that China and crude oil, discussed above, are leading contributing factors.  Interestingly, the yield curve, which is a leading indicator, remains positive for the US economy.  It is also a component of Dr David Brown’s Traffic Light Indicators which do not indicate a recession in the world’s biggest developed economy. 

Bear markets without recessions in the US can be sharp but they are also infrequent and usually of short duration, with minimal economic impact.  The most dramatic example which you may recall was 1987 but I believe the S&P 500 Index briefly crossed the 20% decline, regarded as the minimum fall for a bear market, in 2011.

Unfortunately, the outlook could be worse.  There are plenty of concerns, not to mention uncertainty, and no one knows the future.  Currently, markets are very oversold in the short term but beneath large top formations.  Cataclysmic predictions are often a contrary indicator, frequently heard near the bottom of a bear market. 

Historically, panics have proved to be buying opportunities.  I do not see why this should be any different, but I would proceed cautiously and on an incremental basis, because markets frequently overshoot. 

(See also Dr David Brown’s Traffic Light Indicators above.)