Senior advisor tells WP he is positioning himself to be “ready for anything”
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It’s official: this is the longest bull market in history.
The S&P Dow Jones Indices said the rally, which began on March 9, 2009, at the bottom of the financial crisis, yesterday set the record after reaching 3,453 days.
According to a Bloomberg report, about $23 trillion in value has been created in the past 9-and-a-half years. The question is: what happens now? Does its age mean the end is nigh? Or are strong fundamentals an indication there is some way to go?
Sean Harrell, partner and senior advisor at Howe, Harrell and Associates, said the situation presents a dilemma to portfolio managers. On one hand, the market’s cyclical nature tells us what goes up must come down. On the other, the Winnipeg-based advisor said that the metrics suggest the bull run will continue.
“We’re just trying to be middle of the road and be ready for anything for clients,” he said. “We’re not going out super aggressive for most of our clients. Our younger clients, we’re still going out with a pretty aggressive approach because they have time on their hands but for most people, we’re scaling back our risk a little bit and waiting for opportunities.
“They are few and far between on a fund level so we’re just focusing on picking the proper managers to find the opportunities on single stocks and bonds and companies.”
Harrell said his scaling back process has involved incorporating more investment grade bonds into portfolios, a little more floating rate bonds and “not going too far out there with equities”. He is staying away from China and emerging markets, staying closer to home with US and Canada.
He said: “If someone is putting new money into the market right now and taking the long approach, I think they might be looking at the wrong metric to make that decision.
“If you’ve been in the market a while and you’ve made a bunch of gains and you’re doing well, that’s one thing, don’t disrupt things. If you have a bit of a pullback, that’s fine, you can handle that.
“But if there’s brand new money going into the market, I would be very careful as to where it goes because that correction could be tomorrow, it could be six months from now or it could be three years from now.”
With 19 years’ industry experience, Harrell got his feet wet during the tech wreck correction in 2000/01 but believes the 2008 crash, driven by the credit market, was a different animal to the current scenario.
He said: “They are saying that ‘credit is under control’ – I’m suspect on that one. I don’t 100% believe the people telling us that. I think Canada is actually in worse shape than US on household debt.
“If interest rates continue to go up it will weed out a lot of these people who are living beyond their means. I don’t think another 2008 will come but there could easily be a correction in the equity markets and a correction in the housing market to reel all this in.”
