Markets are going round Cape Horn

What will happen now that QE is starting to taper?

Having had good passage through the warm gulf stream waters of "quantitative easing" ("QE" to you and me) flowing strongly from the shores of the US and latterly Japan, markets have now reached what, in market confidence terms, may be regarded the investor’s equivalent to the nautical experience of going round Cape Horn. We are passing into the rough seas where the conflicting currents of one ocean system, meet those of another. That is to say - translated into impenetrable dry as dust market speak – where the expected "tapering by the US authorities of Quantitative Easing" meets US economies recovery, putting hitherto bullish equity market sentiment to the test. Will the equity bull market of recent times be wrecked by the withdrawal of cheap money? Can you have a continuing bull market fueled by near no cost credit when interest rates start to rise?

We knew that we had moved into these choppy seas this week when the yield on US 10 Year Treasury bonds went through the previous 2 per cent "resistance level" to close at 2.23 per cent. The ship’s timbers may have creaked a little but the SS Equity Markets sailed on the next day, blown by news of the gathering pace of US economic recovery in housing, employment and consumer confidence, only to be blown off course the following day by the shore winds of analysts’ concerns, as they publicly pondered what it meant? Suddenly, the thing that markets hate most - uncertainty - had arrived.

My own view is that equity markets needed what I call a "linear regression down swing" in prices to remain faithful to its longer term trend. In short markets look a bit overbought in a year  when investors decided it was unwise to "sell and go away in May" because they did not want to be out of the market, and short of stock, when something as big and important as the continued stirrings of the long awaited US economic recovery were being witnessed. Consequently, the market was flooded with bearish conjectures as investment banks’ scrambled to take profits on bull positions and at the same time, get back some stock for their market makers, who must have been "short" after a long bull run that continued un-seasonally into May.

I retain my early, long running bullishness of equities, because the US Federal Reserve will tread carefully in managing a return to normalizing its interest rate. I reasonably conclude that it will tailor sales of the bonds it acquired, to fit the balance sheets of non banking providers of finance and credit with enough leg room with the right kind of bond collateral at the right yields, to facilitate the working of short term cash markets. Generally, most big companies balance sheets are in good shape to withstand higher interest rates. As Franklin Roosevelt once reassuringly said, the only thing to fear is fear itself.

Ben Bernanke. Photograph: Getty Images

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For the first time in my life I have a sworn enemy – and I don’t even know her name

The cyclist, though, was enraged. “THAT’S CLEVER, ISN’T IT?” she yelled. “WALKING IN THE ROAD!”

Last month, I made an enemy. I do not say this lightly, and I certainly don’t say it with pride, as a more aggressive male might. Throughout my life I have avoided confrontation with a scrupulousness that an unkind observer would call out-and-out cowardice. A waiter could bring the wrong order, cold and crawling with maggots, and in response to “How is everything?” I’d still manage a grin and a “lovely, thanks”.

On the Underground, I’m so wary of being a bad citizen that I often give up my seat to people who aren’t pregnant, aren’t significantly older than me, and in some cases are far better equipped to stand than I am. If there’s one thing I am not, it’s any sort of provocateur. And yet now this: a feud.

And I don’t even know my enemy’s name.

She was on a bike when I accidentally entered her life. I was pushing a buggy and I wandered – rashly, in her view – into her path. There’s little doubt that I was to blame: walking on the road while in charge of a minor is not something encouraged by the Highway Code. In my defence, it was a quiet, suburban street; the cyclist was the only vehicle of any kind; and I was half a street’s length away from physically colliding with her. It was the misjudgment of a sleep-deprived parent rather than an act of malice.

The cyclist, though, was enraged. “THAT’S CLEVER, ISN’T IT?” she yelled. “WALKING IN THE ROAD!”

I was stung by what someone on The Apprentice might refer to as her negative feedback, and walked on with a redoubled sense of the parental inadequacy that is my default state even at the best of times.

A sad little incident, but a one-off, you would think. Only a week later, though, I was walking in a different part of town, this time without the toddler and engrossed in my phone. Again, I accept my culpability in crossing the road without paying due attention; again, I have to point out that it was only a “close shave” in the sense that meteorites are sometimes reported to have “narrowly missed crashing into the Earth” by 50,000 miles. It might have merited, at worst, a reproving ting of the bell. Instead came a familiar voice. “IT’S YOU AGAIN!” she yelled, wrathfully.

This time the shock brought a retort out of me, probably the harshest thing I have ever shouted at a stranger: “WHY ARE YOU SO UNPLEASANT?”

None of this is X-rated stuff, but it adds up to what I can only call a vendetta – something I never expected to pick up on the way to Waitrose. So I am writing this, as much as anything, in the spirit of rapprochement. I really believe that our third meeting, whenever it comes, can be a much happier affair. People can change. Who knows: maybe I’ll even be walking on the pavement

Mark Watson is a stand-up comedian and novelist. His most recent book, Crap at the Environment, follows his own efforts to halve his carbon footprint over one year.

This article first appeared in the 20 October 2016 issue of the New Statesman, Brothers in blood