This week saw a welcome respite for investors. Crude oil prices have rebounded off their recent lows and concerns over a Chinese-led economic slowdown have receded somewhat. Good enough for equities to rally 3% in the past 5 trading days, giving us something to smile about over the weekend.
Markets are driven by fundamentals over the long term, but January serves to remind investors that emotion and momentum are in the driver’s seat in the short term. Nothing has really changed from last week to now, yet markets have rebounded. Why? The answer is simple: enough of us feel more optimistic this week then last. Next month is likely to see markets continued volatility as investors try and make up their minds as to what direction fundamentals will take in 2016. Stay tuned.