“Mr Market” seems to be optimistic about the future, if recent moves in the FTSE 100 are anything to go by.
The Footsie has powered up by 3.5% over the past five working days, at the time of writing. On Wednesday alone, it rose by a little over 1.6%.
What drove the latest rebound? Well, thankfully, there were positive noises being made about possible peace talks between Vladimir Putin and Ukrainian President Volodymyr Zelensky.
Meanwhile, the Chinese government stated that they would support financial markets through economic stimulus measures following recent Covid-enforced lockdowns.
Both these factors helped in steering Mr Market away from its recent pessimistic outlook.
Who?
Concocted by Benjamin Graham — oft-referred to as the father of value investing — Mr Market is essentially a caricature of an investor who, Graham said, has manic-depressive traits and is ruled by emotion on a daily basis.
First introduced to the world in The Intelligent Investor, we are reminded that Mr Market is there to serve us (through offering investors a low sale price when in a pessimistic mood) rather than guide us.
What now?
Here at The Motley Fool, we take a long-term view on investing. As a result, I don’t place a heavy emphasis on what the FTSE 100 is doing on a daily basis.
Yet current trends are buoyant, further supported by Wednesday’s surge on top of recent gains.
According to Graham’s parable, this suggests that Mr Market’s ruling emotion is one of optimism towards buying shares.
So let’s take a look at what the Footsie has been doing over, say, six months instead. Up by more than 5.3%. Over the last year? It’s risen by almost 8.5%.
This gives me confidence that, despite Putin’s invasion of Ukraine last month, it does not appear to me as though we’re headed for another lasting bear market.
With that in mind — although, of course, no-one knows what the future might bring at any given moment in time — I’m looking to contribute to my S&S ISA before the (imminent) end of the tax year.
What I’ll buy, I admit I don’t exactly know yet. I have my eyes on a few quality FTSE 100 companies whose share prices still appear to be beaten-down.
But what I am sure about is that, unlike Mr Market, I won’t let emotion rule my investing decision-making.
Instead, I will likely follow guidance from the Motley Fool Share Advisor analysts who are constantly calculating the fair values of listed companies through fundamental analysis.
Because I can be sure that they won’t be issuing guidance simply based on the mood they wake up in!
The post Why the FTSE 100 jumping 1.6% on Wednesday may be a turning point appeared first on The Motley Fool UK.
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