Equity markets are often referred to as being ‘forward looking’, meaning that the market runs ahead of the current set of circumstances, pricing the future into today’s prices. This reporting season seems to confirm expectations, with companies announcing good to strong results, dividends coming back and in some cases companies paying specials; one off dividends and a number of companies giving back capital either through on-market or off-market buy-backs.
Hearing this, it could be easy to just accept that all will be good, difficult times are behind us and markets are fully informed and behaving rationally. However, in this environment, it’s a good discipline to reflect on why markets are strong and consider the fundamentals to determine if the strong performance will continue or if it’s time to adjust portfolios.