Shares this year are tears – but not everyone is impressed.
Several investors restrained their enthusiasm even when the market recovered from the correction. While global stocks gained 11% this year, 46 billion dollars were withdrawn from equity funds, reports Bank of America Merrill Lynch.
This dynamics created what some strategists called the "no-fly" rally, in which the shares had the strongest start to the year after 30 years, but investors took money from stock funds. In other words, their hostility towards the shares was not synchronized with other forces that brought the market higher.
According to Alain Bokobza, head of the global asset allocation and equity strategy at Societe Generale, investors should have a position for a continuing "dragging the rope" between bulls and bearers with the forces pulling on the stock market.
Regarding what keeps the market afloat, despite the outflow of funds, redemption of shares remains one of the reliable drivers of the profits of this bullish market. The corporate tax reform has led to a redemption of shares to record last year, and in 201
Many investors, however, do not share such enthusiasm regarding future stock prices.
"The risk aversion is now very obvious, and portfolios already hedge a lot of risks," Bokobza said in a recent note to clients.
He continued: "Monetary positions have also become very noticeable, as the prospect of a US recession in 2020 does not promise anything good for risky assets."
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The American recession next year is not foolish, according to other strategists at SocGen. In a separate note, Arthur van Sloothen and his team identified the profitability curve and their own indicator of economic news coverage as two indicators that indicate that the next recession could come sooner rather than later.
This risk helps to explain why some investors stood on the sidelines of this rally, and even extracted money from stock funds. SocGen noted that most of them are turning to cash instead of risky assets; Apparently, they are listening to the widespread appeals to hold more powdered powder and take advantage of higher cash incomes.
On the side of the rope pulling rope, Bokobza noted that monetary policy is still free, fears of a full trade war between the United States and China may retreat, and Britain could reach the level of Brexit's deal.
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Bokobza does not urge investors to dump the risk of assets in general, that he expects some of the storm clouds to come to grasp soon. But he recommends a cautious "barbell" approach with three strategies that should help investors maintain influence on stocks without full combustion. They are cited below and cited directly from him:
- "We do not respond to the current momentum and keep our weight on stocks at a rather low level of 40%, as we kept our position at the end of last year. Despite the fact that we raised stock performance compared to the previous quarter, we still see a drawback by the summer of 2020, forced by the very acute asymmetry of global central banks.
- "We have a strong emphasis on risk control, adding to assets with stable characteristics and / or those that bring b dekorelyatsiyu (read: lower volatility) to our division. "