Natixis Global Asset Management said the question it gets asked most often by advisers is how long the equity rally will last.
Global equity markets have now entered the ninth rallying year since March 2009.
The question now is whether this surge in equity markets is set to continue, a question which has most commonly been put to the asset management giant over recent weeks.
David Lafferty, chief market strategist at Natixis, explained that investors who haven’t participated in the equity rally want to get involved because they feel like they are missing out.
While those clients who are already invested are nervous and are now considering whether now is a good time to get out.
“They can’t both be right,” Mr Lafferty said, adding: “While pure market timing is a fool’s errand, investors should attempt to understand the upside and downside trade-offs of their equity holdings.”
There are worries ahead but at the moment the markets appear oblivious to these.Philip MiltonThe market strategist said there are no signs of any profound risks that might lead to a significant sell-off in risk assets.
Despite the geopolitical risks, Mr Lafferty stressed that they tend to be “episodic” and short-term, and are therefore unlikely to trigger a bear market.
Meanwhile, stock prices are elevated in almost every market, which he said could imply positive returns, but lower performance compared to historical averages.
The question resides in how much equity risk their clients should be exposed to, and where the most compelling opportunities are within the equity landscape.
According to Mr Lafferty, the most attractive region at the moment is European equity markets, as the region seems to be picking up steam.
This echoes assertions made by several investment professionals who predict investments in continental Europe to pick-up from very low levels.
Despite not being inexpensive in absolute terms, investment experts claim European shares continue to look relatively cheap compared to other regions, particularly the US.
Philip Milton, managing director of advice firm Philip J Milton & Company, said there is still plenty of value available in the markets, but said he was ever-more concerned about the tech bubble in the US and its impact on the UK.
“I resign myself to buying what I consider to be good value – often with a ‘recovery’ bent to it too, and usually a good flow of income to help us weather any storms.
“Inadvertently we have increased our exposures too to ‘other’ assets to break the correlation from the main indices – again as a form of protection.”
He also said investments trusts at big discounts offer another form of protection if markets start to fall.
Mr Milton added: “There are worries ahead – with the general election, the fall-out from Brexit, Donald Trump and so on – but at the moment the markets appear oblivious to these.”
katherine.denham@ft.com
