Cayman Islands: Market Viewpoint

Last Updated: 26 March 1998
"Market Viewpoint is based on information which we consider to be reliable, but is not guaranteed as to accuracy nor does it purport to be complete."

Market Viewpoint
"Blame it on El Nino"
Sheree Ebanks, Senior Manager-Investment Services
Bank of Butterfield International (Cayman) Ltd.
March 13th, 1998

Why not? The poor little boy has been blamed on everything else this year, we may as well add the turbulent market we have been experiencing. For those of you who remember the article that appeared in the 2nd quarter of 1997, we likened the market to one of the rollercoaster rides at Busch Gardens. Guess what, it's not over yet. No, don't panic....not the bull market we have witnessed for the past three years, just the volatility. But, hang on, let's take a look back before glancing forward.

1997 Scoreboard

INDEX               1997          1996

Dow Jones
Industrials         25.05%        29.13%

S & P 500
Stock Index         33.17%        23.07%

grade all
maturities             10%          3.4%

Balanced Fund        14.2%          6.4%(6 months only)

Gold               -21.48%        -5.10%

Silver              25.05%        -9.60%

AFC 31/ NFC 24

It's still hard to believe that it was just December 1996, when the Dow was at 6,400 (or near about) that we heard those two words, "irrational exuberance", spoken by Federal Reserve Chairman, Alan Greenspan. This was probably led by the belief that valuations were getting high. Many now believe the same and are looking for a market correction of 30% - 50%. What's even more amazing is that we have had three consecutive years of 20%-plus stock-market returns-defying all laws of gravity. It has never happened before. The Dow Jones Industrial Average started the year at 6,448. With many bumps along the way, it hit our target of 8,200 in July and finally finished the year at 7,906.50. We weren't so adept with the interest rate prediction. We expected the long bond to close out the year between 6 1/2% - 7%. During the year the long bond yield fluctuated between 6.64% at the end of 1996 to a high of 7.10% in March (right after the Fed raised rates and markets went down the drain), closing the year at 5.92%. The year end rally in the bond market was preceded by the Asian Contagion, as it has been dubbed. We have been spoiled by the stock and bond market performances over the past few years; so what's in store for 1998?

More of the same! I think that the safest bet for 1998 is that we can expect continued volatility, more and more frantic phone calls from worried investors, and some sleepless nights. We still believe we are on target for Dow 10,000. Would you believe that the S&P 500 crossed through the 1,000 mark?

Factors that will have an impact on the market's performance this coming year will be (Surprise!) the direction of inflation, corporate profits and continued worries over Asia.

Before we get too much into the nitty gritty, let me first add that I still believe there is a lot of money out there with no place to go but to the US stock market. The last few years have added a new element to the melting pot of investing. Those of us Baby-Boomers, who have been spoiled by these exceptionally good markets, are convinced that the only way to save is through the stock market; this participation will continue, bringing more and more money to Wall Street.

We see a stable economic situation in the US, again contributing to good markets. Many people have batted around the "D" word. Deflation is the opposite of inflation, a drop in general price levels. We don't see this happening. Inflation will remain subdued, perhaps as low as 1 1/2% by the end of 1998, the Federal Reserve may even look at bringing rates down from the current Fed Funds rate of 5 1/2%, but I doubt it. Growth will continue at around the 2% level for the year. All in all, a golden scenario.

One of the other factors mentioned earlier is the Asian Crisis. I believe the worst is over and the situation has stablised. Remember Mexico? The Mexican crisis happened late 1994, early 1995. Well, guess who was the star performer for the year... Mexico! A 54.21% rise in U S dollar terms. These markets too, will rebound eventually. What will develop is pressure on exports reducing growth by 25 to 50 basis points; however, interest rates have been coming down thus taking the pot off the stove thereby balancing growth. Corporate profits will also be effected, but are still expected to come in around the 10% level.

On a lighter note, the AFC won the Super Bowl for the first time in 13 years. The last time they won the stock market was flat, bringing in 1984 at 1,220 and ending at 1,211. So, if you use the Super Bowl indicator, don't expect much this year!

We do expect a cooler year, (this could be attributed La Nina, another weather phenomena expected to take over from El Nino mid-year). The Dow will still be up around 10% after the wild ride and close the year between 8,400 - 8,700. The long bond will remain low maintaining a level between 5 3/4% to 6%.

So, strap on those seat belts and hang on to your hats. Stay conservative, very selective and don't panic!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions