May was a month I would rather forget, spent in a haze of pain, drugs and hospital ceilings. The lacklustre markets of the past few weeks would have been a preferable experience. Make no mistake, though, recent articles from the pen of yours truly have been genuine. I was able to organise my absence with sufficient notice to cover a number of topics that had been bubbling at the back of my mind. True, my comments will have been a little less timely but should still carry a message for investors. Underlying fundamentals rarely change as swiftly as some would have you believe.
A wise old technical analyst once said to me that market timing is the most difficult element in portfolio management and is more down to luck than judgement. Perhaps in these days of instant information it is possible to make a living by second guessing market moves but, personally, I still consider there to be a powerful case for pound cost averaging.
There is an advantage in viewing market trends with enforced detachment. Themes emerge more clearly, even if many have been lurking in the background for some time.
Unsurprisingly, prominent among current burning issues is the strength of the price of oil. As the price rose above $40 a barrel, it became difficult for the word “oil” not to appear without Opec mentioned alongside. While this cartel of oil-rich rations is about to hold a meeting which will be closely watched, this connectivity appears overemphasised in my view. Opec's influence is less significant on this occasion. Russia, for example, is now the biggest single oil producer in the world although it is also a big internal consumer, unlike the Opec countries. Furthermore, Opec is concerned with supply issues whereas it is demand that is fuelling this rise. It is arguable that a bigger problem is the current high utilisation of refining capacity. Whatever the causes, it is hard to see the price of oil falling significantly in the foreseeable future unless the global economic picture deteriorates sharply.
While the US motorist is making the loudest noise about the inequity of expensive fuel, current high demand is more about global economic growth – particularly in the Far East – than anything. Talking of the growing economic powerhouses on the other side of the world, the wild swings in Indian share prices as a consequence of the unexpected general election result, and the surprising subsequent developments on who should lead the legislature in the world's biggest democracy, should not go unremarked. Economic power continues to migrate East. Investors ignore this at their peril.
Another story that grabbed my attention was the sharp hike in the steel price. Again, demand is outstripping supply and it is China that is being roundly blamed for creating these conditions, along with shortages in other raw materials. Imagine if US consumers stopped buying Chinese goods and the Chinese economy slowed dramatically. On second thoughts, don't.
Back here, such company results as I have perused have been encouraging but markets have done no more than move sideways since the start of the year and investor confidence continues to be fragile. At the back of people's minds will be interest rate policy in London and Washington while there is a growing concern that dearer oil could lead to higher inflation. It is at times like this that I wish share valuations were less stretched, particularly in the US. It could be an interesting summer.