THERE IS A KIND OF HUSH ALL OVER THE WORLD

03/2015-

I enjoyed the recent Lunar New Year celebrations a lot, catching up with relatives and long-lost friends. No single day of the 15-day long New Year celebration went without a toss of Yu-sheng and shouting "Huat Ah". Most dinners and parties would then gravitate towards more drinks and bonding over karaoke and mahjong sessions.

For old –time sake, I sang Herman's Hermits 1967 hit "There is a Kind of Hush" which hit the US Top 30 of the Billboard Hot 100 in 1967 in 3 weeks upon release. It was this song that I sang during the karaoke session that juxtapose my thoughts on the current malaise in the financial markets.

The current bull market is its 7th Year and in full swing especially in the US with stocks smashing new records week-in, week-out – the S&P 500 has set a new all-time high, pushing its returns to over 250% since the depths of the Global Financial Crisis.

Even our local FTSTI which hit a low of 1,456 on the dark and hush day of 9th Mar 2009, has soared 1,946 points to close at 3,402 on 27th Feb 2015.

Elsewhere, the latest salvo from the ECB on further QE has spurred European markets up many steps, with the FTSE All-World Index setting a new record.

In Asia, the Japanese Nikkei smashed through a long-time resistance of 18,000 while the Shanghai Composite continued its red-hot pace, shooting up another 200 points YTD, after registering a 50% gain in 2014.

So on the surface, investors should be joining me to karaoke and party right? Instead, what I am deciphering is a kind of hush in current market conditions and sentiment.

As the lyrics for the song goes –

"There's a kind of hush All over the World tonight All over the World You can hear the sound of lovers in love"

But unlike the song, I certainly cannot hear the sound of lovers in stocks.

When I used to head up institutional sales in several stockbroking firms in Wall Street and Singapore before I retired to travel around the world since 2009, almost every new landmark hit by the stockmarket was greeted by free-flowing champagne and "Huat Ah" sessions, but current market conditions in the dealing rooms and among remisiers are more like "Sian Ah" feeling.

In fact, the feeling I get is that more young investors are more inclined to join the military and become storemen after watching the hit movie over the Lunar New Year "Ah Boys to Men" rather than fall in love with stocks and enter the financial industry.

Feelings of euphoria and optimism are certainly lacking in this current record-breaking market rally. Back in my days, trading floors were abuzz with young day-traders in jeans and T-shirts, all eager to join me to capitalize on the market rallies and make enough money to retire before 40 years old.

Sadly, as the song goes again -

"You know what I mean Just the two of us and nobody else in sight There's nobody else,,,,,,,,,,"

Indeed, one of the lackadaisical reasons for the current malaise is the feeling that this has been a rally caused by wanton monetary easing by Central Banks, rather than earnest earnings growth of companies or better economic outlook of countries.

Thus, if you analyse the returns from active fund managers in their latest quarterlies, it does seem that there is little variability in returns as sector rotation strategies or co-relations pair plays have little room to exert themselves in the current rally.

Indeed, the classic paradigm has not worked – interest-rate sensitive stocks like REITS and defensives like Telecoms have outperformed with classic bull benecifiaries like banks and financials have underperformed.

So what should the smart investor do now?

Again, back to "There's a kind of hush" -

"So listen very carefully Closer now and you will see what I mean It isn't a dream The only sound that you will hear Is when I whisper in your ear"

And what I will whisper in your ear is – continue to study market co-relations well to get the feel of what it is telling you. It isn't a dream but stay trim and alert to "Huat Ah" in this coming year when the next market seizure presents itself.

Hush Hush.