View more on these topics

Heights of sophistication

I am trying not to take this personally but here am I trying to stimulate a debate about whether or not we have of late been enjoying a bear market rally – one that will run out of steam and hit new lows – or the start of a new bull market and apparently there is no debate to be had at all.

For while last week I was, although I say it myself, courageously endorsing the answer “it depends”, the good, good people of 1st – The Exchange were polling IFAs along the very same lines and coming to the conclusion that it did not really depend at all.

Research by the curiously named technology solutions provider and its even more curiously placed hyphen found that no fewer than three-quarters of the 254 advisers polled felt that the recent strong stock-market performance amounted to nothing more than a bear market rally.

At the same time, seven out of 10 advisers reckoned that these gains had been principally driven by the reallocation of previously invested cash into equities from other asset classes rather than any new money coming in from private investors.

What’s more, it would appear that this lack of confidence among private investors is supported by the IFAs themselves, since almost two-fifths do not see a bull run in equities before next spring while only a slightly smaller proportion do not expect such a run for another 18 months. Only a quarter of the advisers polled expect a recovery within the year.

So that’s me told, then. Except that First Hyphen added its own conclusion that: “Anecdotal evidence would suggest that this reallocation of capital is taking place among more sophisticated institutional investors rather than private investors who remain exceedingly cautious about where they invest their money.”

Fair enough – except isn’t the thing about more sophisticated institutional investors that, well, they are more sophisticated? And if they are switching into equities, is there not at least a possibility that they know what they are doing?

Yes, I know that second question will inevitably have provoked many a snort of derision on the back of the evidence of the last few years – and indeed there are plenty of times that my view of every type of investor has been of their collectively showing all the discipline of a group of Sunny Delight-charged children running about a garden convinced they are superheroes because they have their anoraks on their heads.

Still, if we are crediting institutional investors with the description “more sophisticated”, should we not aspire to this blessed state rather than dismissing it as beyond the limits of our own superpowers? And if they are seeing signs that equities might not be such an awful place to be invested for a while, shouldn’t private investors and their advisers at least be assessing that possibility too?

That said – he weasels, preparing to execute some fancy footwork – the bears have certainly seemed more vociferous in recent days. For example, one internal briefing note, which was penned by a fairly important strategist and which I probably should not have seen, is witheringly dismissive of anyone who expects a V-shaped recovery, predicts further falls, well, around about now and confidently expects the “real” sell-off to take place either at the end of the third quarter of this year or the start of the fourth.

And if you would prefer to put a name to a grimace, I can offer you this morsel from the latest, lengthy communication from Jeremy Grantham, top man at Boston-based investment manager GMO, who views a true lasting bull market at this particular point in time as “most unlikely”.

He continues: “A large rally here is far more likely to prove a last hurrah…a codicil on the great bullishness we have had since the early 90s or, even in some respects, since the early 80s. The rally, if it occurs, will set us up for a long, drawn-out disappointment not only in the economy but also in the stockmarkets of the developed world.”

So there you have it and, if you have been feeling bearish of late, I trust this support from such an illustrious source has, as it were, brightened your day. After all, I am reliably informed that misery loves company.

Julian Marr is editorial director of


Skandia wrap sales up 62%

Skandia saw a 62 per cent increase in sales of its wrap in the first quarter of this year but single-premium sales in the UK and international business plunged by 40 per cent.

Analysis: Africa suffers ‘grave’ hit

The global economic downturn has “gravely affected” Africa, according to a report by several leading international organisations.The African Economic Outlook (AEO) – produced by the African Development Bank (ADB), Organisation for Economic Cooperation and Development (OECD) and the United Nations – predicts that the continent’s growth rate will fall to 2.8% this year. If anything […]

Global executives call for tighter regulation

The global economic downturn has shaken capitalism to its foundations, according to a global executive survey by the Economist Intelligence Unit (EIU).“Capitalism has changed fundamentally,” says Jason Sumner, the senior editor of the report, in his summary of the results. Executives now want more regulation in the banking sector and beyond, the survey found. The […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm