The long bull market: what the experts think
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Missile? Meh…
“The FTSE 100 tumbled to a 16-week low on Tuesday as investors reacted to North Korea’s latest missile tests by dumping shares,” said Phillip Inman and Angela Monaghan in The Guardian. Markets across Europe and Asia fell as investors “fled to safe haven assets like gold”, pushing up the price by $4 an ounce to $1,321. But the funk in the markets didn’t last long. Within a day, haven assets were on the retreat and equities were rising again. Given the lingering concerns over North Korea it was, as Charles Diebel of Aviva Investors noted, a “remarkable reassertion of risk appetite”. And, as Diebel added, it also highlights “the degree of comfort markets have about central bank policy remaining benign”.
Long in the tooth
For “comfort” many read “complacency”, said Annabelle Williams in The Times. Indeed, a sizeable question mark hangs over this long-in-the-tooth bull market, which began in March 2009. Many believe valuations are already “distorted” but, as Nandini Ramakrishnan of JP Morgan Asset Management points out, the current bonanza is, in some ways, “unremarkable”. Returns on the US S&P 500 are still lower than they were in three previous bull markets – two of which also lasted significantly longer. Indeed, if the current bull comes close to replicating either the periods of 1949-61, or 1987-2000, it still has “much further to run”.
Take profits?
The dilemma confronting investors is that “the best returns often come in the last few months of a bull market”, said Williams. “Selling out too soon could mean you sell at a much lower price.” Nonetheless, Adrian Lowcock of Architas advises that it might be “sensible” to take a “pragmatic” defensive attitude and bank some profits. Recent wild swings in some FTSE-100 stocks after a prolonged “summer lull” could well be a sign that “the UK equities bull run is nearing its end”, said the FT. Last week Provident Financial, Carillion, WPP and Dixons Carphone all suffered “drastic falls”. As Russ Mould of AJ Bell concludes: “When bull markets start to tire, cracks appear in the weakest links first.”