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Has the “Great Rotation” just started?

Wed, 13th May 2015 Leave a comment

Chart of FTSE-100 at 12th May 2015It looks like I was right to express doubts over whether the oscillation around the 20 day moving average in March constituted an instance of my peak pattern as the FTSE has not dipped as I expected. It hasn’t risen really either though, so where we go in the short-term is still in the balance. The fact that the index is still hovering around the 20dma suggests to me that we could still see a dip. There is some concern in the bond markets that the 30 plus year bull run may be coming to an end as prices are so high for some countries’ short term debt that yield has gone negative, but, while this may cause volatility in the near-term, it isn’t necessarily all bad for shares. It could be that money exiting the bond market could find its way into the stock market. The bond market is many times the size of the stock market, so this could have a significant effect. I doubt that bonds are going to crash just yet, but we may see some yield hungry investors moving from bonds into shares (the “Great Rotation”) which should boost prices in the medium term.

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