North Korea

September 29, 2015

North Korea was mucking around with launching a rocket recently (presumably with only a smallish warhead in it) and when it failed to launch, the investment markets rallied.  The theory is – we aren’t going to get blown up today, lets celebrate and invest some money!!  We did giggle a bit about it here, but then we realised it’s not a bad sign.

At the other end of the scale, you can sometimes detect the end of a run in investment returns when the latest news item no longer has an effect. An example is when share markets have done really well, then a “good news” item appears (such as surprisingly lower unemployment figures), but this then fails to make the market go higher. This could signify it’s time to expect a downturn.

Conversely when we have had a rough time and the bad news doesn’t drive markets any lower, we may well be at an end of the downtrend. All the doom and gloom is factored in and the only direction the market can go is ‘reverse’.

So the fact is, good news (however far the definition is stretched in this case ) gives the markets confidence. If it wasn’t, we could be in trouble, again.

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