Jeff PrestridgeMay 1 2019

Talking up stock markets

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I have just come back from a short break in Madrid.

A magnificent city full of art galleries – the equivalent of a banqueting feast comprising overflowing plates of Sorolla, El Greco, Velazquez, Goya and Picasso.

If I die tomorrow, I will go to my maker content in the knowledge that I have now stood before Picasso’s “Guernica” and wept at its overpowering brilliance.

It even made the flight delay back to good old Blighty just about bearable, helped in part by a glass or two of fizz.

Holidays are brilliant for the soul and allow the mind and body to recuperate from the battering they receive at work

Although there is not a bucket or spade to be seen (Madrid is quite literally in the centre of Spain) and the train system is more frustrating than ours (I spent an hour queuing for a ticket to Toledo, only to discover the trains for the day were fully booked), I do recommend a trip to this cultural city.

You will not be disappointed. I even mislaid my phone, only for kindly staff at the trendy boutique hotel to find it and put it in safekeeping until five o’clock the next morning when I scurried down in my dressing gown bemoaning my loss. I doubt the same happy outcome would have happened in the UK.

Of course, holidays are brilliant for the soul and allow the mind and body to recuperate from the battering they receive at work – you really do not want to know what has been going on.

They also allow you to forget – for a while at least – all the financial, economic and political woes that beset this fine country of ours.

Over the years, while on a short break, I have learnt to stop reading all incoming emails while keeping social media (especially Twitter) to a minimum for fear of souring my good mood.

So it was rather uplifting upon my return to the UK to learn that one of the world’s leading asset managers is talking up – rather than talking down – stock markets.

The optimist is none other than Larry Fink, boss of BlackRock, who argues that global stock markets are due a “melt up” – rather than a meltdown – over the coming months.

Too many people, he argues, are sitting in cash when they should be putting money into the market and earning an attractive combination of income and capital return.

If only a little of this money sitting in cash drips into equities, the ‘melt up’ will begin.

As the boss of a fund management group that manages some £5tn of investors’ money worldwide, you would expect Mr Fink to talk up his own business book.

And with stock markets in the United States – the S&P 500 index and the tech-focused Nasdaq Composite – reaching new highs, you could soundly argue that caution, rather than a gung-ho investment attitude, should prevail.

But I am in the Mr Fink camp. For the past 10 years, there have been plenty of reasons put forward as to why cash, rather than equities, should hold sway.

The devastating aftermath of the 2008 financial crisis, the vote to leave the EU in June 2016 and more recently mounting trade wars between the formidable powers of the east and west.

Yet, markets have by and large dodged most of the obstacles thrown their way.

It has been better to be in the market rather than sitting on the side-lines in a Lloyds Easy Saver account paying the square root of nothing in interest (0.2 per cent for those who are interested).

Especially given the healthy stream of dividends paid by leading companies, listed either here in the UK or overseas.

Maybe you think I am preaching to the converted (and I apologise if you think that way).

But the benefit of investing long-term in a pension or an Isa is a message that can never be said too often.

As Tom Stevenson, stock market guru at Fidelity, recently said: “If we step back from the market today for fear of what might happen, we will not be able to wind the clock back if things turn out better than we expect.”

Although some financial advisers accuse the press (myself included) of being too quick to talk markets down (‘sensationalising’ is a word often used), I think equities are the only big long-term wealth creation story in town.

It is why I have overseen the launch of new ‘wealth’ pages in the Mail on Sunday and will continue to preach from the gospel according to equities.

Naturally, such preaching will not be conducted without an underlying note of caution. So, I will continue to implore the virtues of regular investing and to encourage investors to build portfolios that are well diversified – more investment fund and investment trust-based than share-based.

I will also suggest a focus more on funds built to last with sustained dividend growth records (take a look at the so-called ‘dividend heroes’ on the website of the Association of Investment Companies).

There will be little emphasis on the latest investment fad in town.

Keep investing on behalf of clients. Keep building long-term wealth on behalf of clients. And when you get a spare moment, book a trip to Madrid and see “Guernica” in all its glory.

Jeff Prestridge is personal finance editor of the Mail on Sunday