While new information from one of the world’s biggest asset managers suggests the bull market is coming to an end, a growing number of Canadian advisors argue otherwise.
New York advisor Josh Brown, known to many as The Reformed Broker, wrote a blog post Thursday that presents some damning evidence that the seven-year bull market is coming to an end.
“Chasing the stocks with the highest price appreciation over the last 12 months (momentum) in a market selling at one of the highest historic valuations is a phenomenon we tend to see toward the latter stages of a bull market,” wrote Brown. “So $31 billion out of index products and $23 billion into active ones. This is a break from the script, for sure.”
Canadian advisors aren’t so sure.
“Most of my people have equity weightings with two-thirds outside of Canada,” said Assante Wealth Management advisor Glen Rankin. “I think probably we’re going to see things get a little soft here. We might see a correction but I don’t think we’re going to see a bear market.”
According to data from Bank of America Merrill Lynch portfolio manager Savita Subramanian, when it comes to U.S. equities, growth factors are outperforming value factors by more than four percentage points. It’s never a good sign when value stocks trail growth stocks because it’s a signal profits are decelerating. Conversely, when value stocks outperform value stocks, higher profits lie ahead.
Brown’s figures from above are the most recent quarterly figures from BlackRock in the U.S. With the S&P 500 basically flat for the last eight months investors are desperate to find something moving higher.
But that doesn’t necessarily mean the bull market has come to an end.
Rankin’s thinking is hardly pollyanna having suffered like most advisors during the 2008 correction. He’s worked hard to position his clients against the next big one.
“We pretty much have got ourselves in a position now where everything is automatically rebalanced and profits are being taken when things are going up so you’re defended when things go down,” said Rankin. “One thing it did do [2008] is it retested people’s risk profiles because a lot of time clients think they have higher risk tolerances then they do. People’s risk tolerances did go down as a result.”
The Nova Scotia advisor’s experiences from seven years ago have left an indelible impression on him. Not one to predict the direction of markets, he still believes equities are an important part of a diversified portfolio.
So, in Rankin’s opinion, the bull might be wounded, but it’s probably not dead.
“Chasing the stocks with the highest price appreciation over the last 12 months (momentum) in a market selling at one of the highest historic valuations is a phenomenon we tend to see toward the latter stages of a bull market,” wrote Brown. “So $31 billion out of index products and $23 billion into active ones. This is a break from the script, for sure.”
Canadian advisors aren’t so sure.
“Most of my people have equity weightings with two-thirds outside of Canada,” said Assante Wealth Management advisor Glen Rankin. “I think probably we’re going to see things get a little soft here. We might see a correction but I don’t think we’re going to see a bear market.”
According to data from Bank of America Merrill Lynch portfolio manager Savita Subramanian, when it comes to U.S. equities, growth factors are outperforming value factors by more than four percentage points. It’s never a good sign when value stocks trail growth stocks because it’s a signal profits are decelerating. Conversely, when value stocks outperform value stocks, higher profits lie ahead.
Brown’s figures from above are the most recent quarterly figures from BlackRock in the U.S. With the S&P 500 basically flat for the last eight months investors are desperate to find something moving higher.
But that doesn’t necessarily mean the bull market has come to an end.
Rankin’s thinking is hardly pollyanna having suffered like most advisors during the 2008 correction. He’s worked hard to position his clients against the next big one.
“We pretty much have got ourselves in a position now where everything is automatically rebalanced and profits are being taken when things are going up so you’re defended when things go down,” said Rankin. “One thing it did do [2008] is it retested people’s risk profiles because a lot of time clients think they have higher risk tolerances then they do. People’s risk tolerances did go down as a result.”
The Nova Scotia advisor’s experiences from seven years ago have left an indelible impression on him. Not one to predict the direction of markets, he still believes equities are an important part of a diversified portfolio.
So, in Rankin’s opinion, the bull might be wounded, but it’s probably not dead.
