It’s not all David Cameron’s fault but he’s been leading from the front. His New Year podcast was full of warnings about the struggles we face as austerity begins to bite. In his words this is when “a lot of the heavy lifting” will be done.
The retailers are also on their annual Cassandra soapboxes. Raking it in at the sales while telling us how hard it’s going to be for consumers in the future. Unions are talking tough about strikes and protests, and commuters have woken up to inflation-busting rises in rail fares and petrol prices.
Homeowners, meanwhile, are met with bearish forecasts for house prices and warnings from the likes of the CBI of big rate hikes to come.
Naturally, the FTSE being a discount mechanism means this is all priced in, except that we start 2011 with the FTSE 100 near 30-month highs, just shy of the 6,000 mark it passed on Christmas Eve.
The FTSE 100 is not a UK index but a global one. Remarkably, however, the British mid caps of the FTSE 250 did even better, up 24 per cent versus nine per cent for the global giants that make up the FSE 100..
So what’s going on? There’s always a disconnect between the stock market and the real economy and it’s probably justified. As long as there is some overall expansion, lean, fit companies will deliver profit gains and stock prices will be supported by a pickup in mergers as firms look to buy growth.
And despite all the doomsayers, I believe there’s a sense the economy may well turn out better than everyone fears. The forecasters were generally too pessimistic in 2010 and probably are again in 2011. There is a lot to worry about but we know what the risks are, and stocks are good at climbing walls of worry.
Another conundrum rose over New Year, and I fear it could take much longer to work out. In the Back to the Future series, Doc is always warning Marty that to meet himself in another time zone would have disastrous consequences for the space time continuum. But when I watched the latest Star Trek film, Spock met his younger self with no consequences. Doc versus Spock – where’s your money?
Ross Westgate is co-anchor of CNBC’s Worldwide Exchange.