It's futile to find reasons for market's behaviour

Jeremy Thomas: On Friday the Dow Jones index slipped over 150 points when the markets opened. No big deal, in the ordinary scheme of things - a fall of 1.5% on the bell is not a catastrophe.

But these days many eyes are trained on the Dow for the simple reason that it is swinging around the 10000 level - and on Friday, the opening slump brought the index to 9990.

This is significant, if only because the nice round number is taken to be an important measure of the sentiment of the global stock investor. Any close below that key mark, and you can expect the bears to be out in full voice.

It is quite useful to look at an index as important as the Dow simply as an indicator of mood. Never mind what caused tempers to fray and tears to well - it's almost immaterial, since we will always be fitting the news to the visible proof that is already evident on the chart.

For instance, is it really true that "European and US markets fell on Friday after China tightened its monetary policy to cool off growth and official figures showed the euro zone's recovery from recession nearly stalled in the fourth quarter"?

The above quotation, from a news-wire report, shows how futile it is to always find an immediate reason for Mr Market's behaviour. Did the fact that China decided to make its banks stash more of their cash with the central bank, and hence lend less, frighten Joe Fundmanager into selling a fat chunk of his holdings in America's 30 largest companies on Friday? I really hope not.

That move by China has been long in the making - the government has made no secret of its intention to cool off the economy. Joe Fundmanager, if he's worth his salt, probably decided ages ago how to position his portfolio based on his access to information about China, and has been acting on that knowledge for a long time before the Chinese government dropped its "surprise" announcement.

Joe Fundmanager had lightened his load long before Friday's dump - and the only people startled into making the Dow fall through 10000 were Mom and Pop investors who, as usual, reacted to news long after the professionals had acted. It's in volatile, suspicious, back-biting times like these that - for once - you just have to trust in your favourite fund manager.

In the first jittery weeks of the new year, the market has been no place for innocents. No time for avuncular uncles in cardigans talking about their "gut feelings" and their pet small caps.

It's all very cute and fashionable to mock fund managers, with their pompous Powerpoint presentations and prognostications, their glib answers - not to mention their performance fees. However, the best and most honest of the breed have expressed exactly how nervous they are about the new year.

They may not tell the non-paying world the truth about what it is, exactly, they're going to be doing about the forthcoming calamities. But you can be sure what they do will be a lot more intelligent than making a big fuss about why an index fell through the 10000 mark.