Shares up again but the correction was due and may not be over

There's no need to panic but be prepared for choppy waters

After a very nasty wobble, the world’s stock markets are once again heading north.

It’s almost as if a corps of people was dispatched to the world’s dealing rooms with copies of the Hitchhikers Guide to the Galaxy in their hands flashing “Don’t Panic” in those famous large, friendly pink letters.

Look, the US, European and Japanese economies are all in good heart (let’s not mention Britain), so you chaps really don’t need to worry. The saying goes ‘sell in May go away buy again on Leger Day, not sell in February’. So all good?

Up to a point.

The current economic bonhomie has sparked fears of tighter interest rate policy around the world, and an end of the stimulus measures by central banks that have stoked stock markets.

It’s also worth remembering that since Donald Trump became President of the US the Dow Jones Industrial Average added nearly 42 per cent up to January 26 2018, driven in part by an overly enthusiastic reaction to tax reforms that look to have some nasty stings in the tail and will inevitably lead to a ballooning US deficit.

Fund managers decided that they weren’t going to worry about that, and dumped billions of dollars into the markets, until they did start to worry.

An awful lot of people - including me - had actually been expecting a correction like the one which appeared to be getting under way earlier in the week to happen at some point.

Must of us had reckoned on it coming rather earlier.

Some of the brief panic was inevitably fuelled by what my old friend David Buik, market commentator at Core Spreads, described as “the teenage scribblers plus the spivs and vagabonds” making merry in the middle of the storm.

Then there’s the financial media, which has continued to expand since last really sharp price falls when the dagger of the financial crisis hit home. Biggest points falls since… Crash… Crisis… Help!

“Market luminaries are saying, inflation and higher rates and a bond bubble are the root causes,” opined Mr Buik by way of explanation for what kicked it all off, but he also noted that the positive economic fundamentals haven’t changed.

“I am not saying the re-alignment is over, it just feels like a sensible adjustment.”

Indeed it does. And it probably isn’t over. Expect some more down days and some more craziness. Corrections are supposed to happen and this market was overdue one.

A crisis though? This doesn’t look like it. Not yet. So don’t panic. Just be ready for a bumpy ride.