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GRTV: No bull like an old bull

There could be a year or two of the bull market left to run, despite wobbles in equities over recent weeks.

Friday, February 16th 2018, 7:24AM

That's according to AMP Capital's head of investment strategy in New Zealand, Greg Fleming.

He said the market drop of early February had "surprised everyone". After a solid 2017 and the strongest January in 20 years, pundits had expected a slow, gentle, non-volatile ascent through 2018, as was the case last year.

But then a convergence of positive economic news sparked inflation fears and many people pulled back on their positions very quickly.

Fleming said, although the market had been running strong for nine years, it was not possible to say that its time was up simply because it was old.

"There's no bull like an old bull. It could have another year or two years left to run if things don't get disrupted on the way through."

There were none of the traditional signs of recession ahead. The world was in a state of co-ordinated recovery, with Europe and Asia stronger than expected and US building was up.

"All regions are booming simultaneously. We're not relying on one region to get through," Fleming said.

That was a stark contrast to years past when investors had had to look elsewhere as Europe faltered or the US hit trouble. But it made it hard for investors to find opportunities.

"You end up looking at relative value because nothing is cheap."

Managers could not stay in cash because it flattened their returns.

AMP Capital had a relatively high cash weighting but he said that was at the expense of bonds rather than equities. Fleming said he was unsure there was the usual diversification benefit to owning bonds at present - when equities sold off this month, bonds did the same.

The bull market could end because of shocks from within, he said, such as the impact of highly leveraged ETFs, which could tip the market. Other possibilities were political ructions or the Federal Reserve tightening faster than expected.

There was no black swan event to be seen on the horizon. "But that's the nature of a black swan, you don't see it."

Tags: AMP Capital GRTV

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