The correction that never happened
With the bull run now into its 9th year, how is one to make sense of this unusual trend and how does one prepare for the inevitable pullback?
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GLOBAL equity markets have gone without a 5 per cent drawdown for more than a year and they haven't suffered a 10 per cent correction since the start of 2016. The stock market has powered through several surprise events - Brexit, President Donald Trump's election and North Korea's heightened belligerence - seemingly without missing a beat. How are we to make sense of this unusual trend and how do we prepare for the inevitable pullback?
To take the first question, the enduring equity market rally is being supported by three powerful forces - improving macroeconomic fundamentals, solid corporate earnings and abundant liquidity. Working in tandem, the three factors have provided broad-based support for the market's stellar performance.
Starting with the macroeconomic backdrop: for the first time since the 2008 financial crisis, the world economy is seeing synchronised growth fuelled by both the developed markets as well as the emerging markets.
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