Market highs: Investors should beware widespread complacency

ALMOST four weeks into 2018 and one could say that stock market trading is going pretty much according to plan, following as it has the script of the past few years, the basis of which is a rosy economic outlook: The United States is recovering from its disastrous 2008 sub-prime crisis, a synchronised global upturn appears to be underway and inflation remains subdued, which means interest rates are unlikely to be raised too quickly.

Furthermore, corporate earnings are forecast to remain robust, adding to the fundamentally attractive picture.

This benign scenario has led to a reluctance to sell stocks down too aggressively, and a widespread eagerness to buy the dips is now prevalent in global markets because all news - good or otherwise - is interpreted as being positive for stocks. For example, US stocks are a "buy" when a strong jobs report is released because it means the economy is doing well; they are also a "buy" when a soft report is announced because it suggests interest rates will be raised only gradually.