I think we are already in the early stages of a raging bull market for shares. And I’ve arrived at that conclusion from watching bombed-out share prices shooting higher on every decent company-specific news update.
This indicator encourages me
One of the biggest indicators, for me, is my watchlist focused on investment trusts. As a quick reminder, investment trusts are companies that invest in stocks and shares of other businesses. And almost every one I’m watching has seen its stock price turn up and shoot higher since June and July.
I’m talking about names such as Scottish Mortgage, Allianz Technology, TR Property, Smithson, Finsbury Growth and Income, Lindsell Train, and others. Those trusts between them invest in companies covering a wide range of sectors and geographies. And if trust share prices are going up fast, it’s because many of their investee stocks and shares are moving higher.
However, I’ve heard lots of investors fretting about whether recent strength in the markets may be nothing more than a bear market rally. Indeed, stocks are known for their tendency to shoot up fast on occasion during a longer bear phase. But such rallies are often short-lived and gains can unwind fast as the falls continue.
Easing supply chain costs
But my feeling is that general sentiment shifted last week with more investors embracing the possibility that the bull may have legs. And inflation news from the US could have been one of the triggers for the change. The rate of price rises eased back a little in July to 8.5%. And the figure buoyed hopes that the rate of inflation may have peaked across the pond.
Of course, July’s figure remains elevated. But it’s a noteworthy fall from the 9.1% hit in June. And I reckon there’s read-across for the UK because, to me, our inflation rate looks set to fall as well.
One of the reasons I’m optimistic about inflation is the way commodity prices have been falling. Oil, gasoline, copper, iron ore, wheat and many others are down from their recent peaks. And some falls have been dramatic, like lumber, which has plummeted by more than 60%. On top of that, other supply chain costs have been falling as well, such as container shipping prices.
Buying good value now
For me, the time arrived a few weeks ago to start ignoring the naysayers and start buying the tempting stocks and shares I’d been watching. And, so far, I haven’t been disappointed. Many have been moving higher.
There’s an old stock market adage advising investors that time in the market is more important than trying to time participation in the market. And the logic behind that is stocks and shares tend to only move higher in relatively short bursts.
Much of the time, the market treads water and moves essentially sideways. So it’s easy to miss those periods when shares are rising by being too fancy with timing. Therefore, I’m not risking the potential for a ‘lockout’ rally where the pullback never comes. Instead, I’m buying good value shares now.
I could be wrong. But, to me, the next raging bull market looks like it has begun.