Whoo, the FTSE 100 has recorded its biggest rise since 2008, and the second biggest one-day rise ever, climbing 9.1% on Wednesday. The only one-day leap to better it was on 24 November 2008, when the top index climbed 9.8%.
It’s all due to US lawmakers agreeing a stimulus package worth $2trn, it seems, and that’s given the world’s stock markets a respite. The Dow Jones soared by 11.4% on Tuesday, its biggest daily rise since as long ago as 1933. And let’s face it, if US lawmakers can get together to agree something so quickly in these politically fractured times, there must be hope for us yet.
What next?
Does it mean the worst of the slump is over? What does it mean?
For me, Tuesday’s big rise means only one thing. That nothing has changed, and the institutional investing world is still as short-sighted as ever. The big market players are mostly interested only in where market prices are going to go today, maybe tomorrow, and looking a week ahead is the long term for them.
Well, actually, for many it’s worse than that. They’re watching their screens constantly, looking to take advantage of any small movement, minute by minute, that comes their way.
Is that any way for us to invest as private investors? No, it clearly isn’t. And our long-term approach gives us an advantage over the big players. We really can forget what’s happening on a daily basis and instead look for companies that should prosper over five years, 10 years, and more.
A further FTSE 100 rise?
The FTSE 100 seems stable at about 5,500 points around noon Wednesday, but that’s surely only until the next bit of news sends it further back upwards, or plummeting further down.
No matter what the City experts conclude from this week’s market movements, they’re almost certain to be wrong. That’s because there’s nothing we can reliably conclude from irrelevant daily fluctuations like these.
With the Footsie turning up, is it too late to look for bargains now? No, it’s never too late to, in the words of Warren Buffett, buy great companies at fair prices.
We do need to be aware that we’re almost certainly in for a pretty severe, and possibly prolonged, recession. Never mind our fears for the economy should we drop out of the EU with no trade deal — the current crisis could make that look like a walk in the park.
Buy the best
But these are times when the very best will come through, and that’s where my focus is right now. In fact, shouldn’t our focus be on the best all the time? It will surely set us up for a more successful investing career than chasing each hot new growth stock up and down.
What counts as the very best? I’d say companies providing essential goods and services, which are prudently managed, and which aren’t at risk from high debt.
I reckon it’s time to forget where the markets are going each day, and focus on buying quality.