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Just to be certain, before putting fingers to keyboard for this story, I looked up the word “unstable” in the dictionary. It defined “unstable” as “not stable.” I may not be the sharpest knife in the drawer, but even my cat could have figured that out. Digging a little deeper, I found the following definition of instability: “the tendency to behave in an unpredictable, changeable, or erratic manner.” Although it’s practically verboten in the investment world to speak of instability or erratic behavior, at the risk of the displeasure of the entire investing world, not to mention my boss, I am going to go out on the proverbial limb and say that the markets currently have “a tendency to behave in an unpredictable, changeable, or erratic manner.”
Any investment prospectus has a disclaimer that past results do not necessarily indicate future performance. Really? The past five years has proven that the stock market is not for the faint of heart. It’s not just the future that is unpredictable – it’s the present. As a matter of fact, this entire week, from 03 June through 07 June, promises the potential of extreme instability as stock markets around the globe are waiting to see what the U.S. Federal Reserve will do in the wake of last week’s end on Wall Street that saw the Dow Jones Industrial Average take a dip of over 200 points, its worst performance since mid-April. Nearly all the global national economies are in such an unpredictable mess that all eyes are focused on the U.S., which itself is in its own economic mess.
When you add the news of the growing apparent failure of Abenomics in Japan, China’s receding demand for raw materials, and the political instability of the Middle East and Africa, world markets appear to be drifting from unpredictable to erratic. One thing that makes this drift apparent is that market seers tend to make wildly disparate predictions in an unstable market. Hence the term “unpredictable.”
The market reactions around the world today indicate just how much investors do not like the unpredictability that comes with instability. Since this is the beginning of the month and governments will not have their economic data for May in hand until later in the week, the markets lack the comfortable feeling of security that they would like to have. The irony is that knowing the figures does not, in reality, change the future, but most everyone seems to think that it does. At least a steady, upward – or even downward – trend lends a modicum of comfort to the otherwise restless hearts.
- The Nikkei 225 was down by 3.7% today. It has fallen 12% since 22 May.
- The South Korean Kospi closed 0.6%
- The Hong Kong Hang Shen dropped 0.5%
- All major market indices in the Pacific Rim finished Monday down from last week’s close.
- The German DAX and the French CAC 40 lost 1.3% and 1.1%% respectively.
- The FTSE 100 has already fallen 1.9% today, with the 250 not far behind with a loss of 0.58%.
Will things get better or will they get worse? It’s really anybody’s guess, which I believe constitutes unpredictability. Or as Mike McCudden at Interactive Investors said, “With ongoing fears over the implications of stimulus withdrawal from the Fed plus the fact we have the usual start-of-month economic readings to look forward to in the coming days, there’s plenty of scope for further volatility.”
I looked up “volatility.” It’s a synonym of “unstable.” Enjoy the ride!
