August markets: Another false warning?

NEARING CRUNCH POINT

Investec's Max King says equity markets are no longer a reliable economic indicator and forecasts a breakup of the eurozone.

The economist Paul Samuelson once pointed out that Wall Street had confidently predicted nine out of the last five recessions. The August drop in equity markets, similar in scale to that seen a year ago, has resulted in what, in our view, is more likely to prove to be another false warning. The last 11 years have contained two of the worst four bear markets since 1900 so it is no surprise that investors have become highly risk-averse, rushing for the exit at the first sign of trouble. Equity markets have therefore become an even less reliable leading economic indicator. We note: ...