OPINION2 August 2018

Animal spirits stir

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Finance Impact Opinion Trends UK

Animal spirits have helped to propel the markets forward in times of uncertainty, says Lorna Tilbian. 

Lion animal spirits_crop

Sweeping aside negative business surveys and weak consumer trends, the stock market hit an all-time high of 7, 859 in the third week of May – up almost 1, 000 points from the year’s low of 6, 866 at the end of March. So much for the old stock-market adage, ‘Sell in May and go away, don’t come back ‘till St Leger’s Day’.

GDP growth of just 0.1% in Q1, the weakest in five years, pushed back expectations of a May interest-rate hike. Economists blamed the ‘Beast from the East’ and a fall in construction activity because of extreme wintry weather. Sterling dropped and the dollar rallied by 7%, from $1.44/£1 in late April to $1.34/£1 by early May. With 70% of FTSE profits dollar-denominated, the market duly rose alongside the world’s reserve currency. 

The market was also buoyed by a rising oil price, which lifted leading FTSE companies BP and Shell. The oil price ...