Technicals win battles, fundamentals win wars

In a series of speeches in May, the US Federal Reserve noted the American economy was improving to the extent that – and conditional upon it continuing to do so – it may be possible to start reducing the extraordinary policy support of the last few years. In reaction to this more optimistic economic outlook, and with asset valuations far from stretched, markets plunged. This perverse and negative market reaction was almost entirely driven by technicals and not fundamentals. If anything, the underlying fundamentals are actually getting better, with the developed world economy starti...