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A Greek exit of sorts in what was a fine week for markets

Jeremy Stewart is head of wealth management and private banking at Danske Bank

Published 13/10/2015

Northern Ireland qualified for Euro 2016 and the major world markets finished the week positively
Northern Ireland qualified for Euro 2016 and the major world markets finished the week positively

The markets were unmoved this week when a Greek exit was finally confirmed, not that any confirmation was needed. There was no talk of an impact on currencies or stock markets, just of an absolutely fantastic performance by the Northern Ireland football team, beating Greece 3-1 on the way to securing qualification for the Euro 2016 finals.

And what a way to reach the Euro finals for the first time, showing determination, teamwork and style. Apparently Shaftesbury Square in Belfast was like something you would expect to see in Brazil, not Northern Ireland; or should that be not Brazil, Northern Ireland.

The good news on the local sporting front was accompanied by good news in terms of market performance. It was heartening to see all of the major world markets finishing the week in positive territory. Following on from what has been the worst quarter since 2011, we saw the strongest eight-day rally in global stocks, also since 2011. Oil shares gained more than 12% and mining stocks rallied by 18% last week. The positive note even extended to emerging markets, with gains of just over 7% for the week.

It was really good to see the bounce back in prices last week. In the long run, market performance is heavily influenced by the potential to generate sustainable income, usually distributed by way of dividends. The real 'secret' to successful long-term investing is to identify companies that can provide sustainable long-term income streams, driven by profitability and a strong balance sheet.

In this vein, we are in the middle of the corporate earnings announcement season and investors will be assessing how well share prices are supported by the prospects for company profits. In the short term, performance against expectations will determine the relative performance of individual company shares. Delivery of results within expectations is already in the share price. But markets try to anticipate earnings and at an aggregate level, will be more focused on predicted future earnings than on current announcements. This brings us back to the importance of global growth, as the key area for investors to assess.

In the midst of such a positive week for markets, the Bank of England decision to keep interest rates at current levels went almost unnoticed.

Perhaps more interesting was the view expressed that "when the Bank rate does begin to rise, it is expected to do so more gradually and at a lower level than in recent cycles". However, it is difficult not to smile, or maybe even grimace, when the Bank's statement finished by saying that such guidance "is an expectation, not a promise". The Bank would seem to be covering its bases.

Belfast Telegraph

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