Don't ignore equity markets
Various investment analysts are now talking about the opportunities which equity markets present to investors and advisers.
Tuesday, October 21st 2008, 6:54AM
Meanwhile Russell Investments says that “long-term investors should not lose sight of the tremendous value opportunities now on offer.”
Sydney-based Investment Strategist Andrew Pease said: “Even in these tough markets, the investors that are willing to add risk to their portfolios over the next few months will be more likely to reap larger rewards in the long term. The short-term risk is that markets are experiencing a capitulation sell-off as investors give up on equity markets amid growing pessimism about the economic outlook.”
“However, equity markets have already priced in a lot of bad news. Valuations, in many cases, are at multi-decade lows.
Stacey’s view is that equities in most places have been knocked down severely – partly by emotive (fear) selling and by distressed vendors.
“We find sharemarkets around the world now pricing in a far more gloomy global outlook than we find probable.”
He says the US market has shown itself to be resilient, European corporates face sub-par growth, and that China is the outlier. While its export sector is slowing its public sector continues to expand.
“A significant allocation to Emerging Markets including Asia, will be key to achieving sufficient growth to achieve investment objectives in coming years.”
Both Stacey and Pease make that point that markets eventually recover.
“When they do, the rebound is likely to be powerful given the extreme pessimism currently priced in,” Pease says.
Stacey says that equity markets typically bottom about six months before a recession ends.
“While a market bottom may be close, it will unlikely be recognisable until it has unequivocally passed,” he says.
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