(Dow) Theory of Everything
March 14th marked the 30th anniversary of ‘Pi (π)’ day, the day on which one of the most decorated numbers in math known as pi or π is celebrated. As one of the oldest and the most recognizable mathematical constant in the world, Pi (π) is the ratio of any circle’s circumference to its diameter. Pi Day is observed on March 14 (3.14 in the month/day date format) since 3, 1 and 4 are the first three digits of π. However, celebration was short lived as on that same day it was announced that the world-renowned & celebrated theoretical physicist and mathematician Stephen hawking passed away.
Hawking is probably best known for his research in so called ‘black holes’ and his quest to find a ‘theory of everything’, a proposed scientific notion which states that there is one all-encompassing theory that explains the understanding of all of physics, combining quantum theory and classical physics into a unified approach which explains the laws of the universe.
Within the investment community there also exists a famous ‘theory of everything’, the so-called Dow Theory which is often used in technical trend analysis to determine which way stock markets are headed. The Dow Theory was developed more than a 100 years ago by Charles H. Dow, founder of the Dow Jones Industrial Average Index, which states that the market is in an upward trend if one of its averages advances above a previous important high and is accompanied or followed by a similar advance in the other average.
For example, if the Dow Jones Industrial Average climbs to an intermediate high, the Dow Jones Transportation Average is expected to follow within a reasonable period of time. The basic premise of the theory suggests that all information – past, current and future – is discounted into the markets and reflected in the prices of stocks and indexes.
The first 3 days of last trading week were a continuation of last week’s trend with the events in Washington DC, USA remaining the key drivers for markets. Sovereign bonds around the world gained ground while equities suffered further losses as the latest change in Trump’s administration fed into concerns that the USA could pursue an even more protectionist policy agenda increasing the likelihood of a global trade war. Those concerns were only heightened by a report claiming the Trump’s administration is seeking to impose tariffs of up to $60 bn on Chinese imports. Disappointing US retail sale figures and mounting tension between the USA/UK and Russia only added to investors’ nerves.
However by Thursday European investors seemed to have digested the political turmoil and decided to focus on the encouraging economic data out of China and the statement made by Peter Praet, European Central Bank chief economist, that ‘Europe might be regaining some of its long lost growth potential’. So in a once again volatile trading week, the Ageas share increased by 2.4% reaching a new all-time high at EUR 43.78 outperforming both the Eurostoxx 50 (+0.5%) and the SXIP 600 Insurance index (+0.7%).