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Is the end nigh?

Bull market resumption or bear market rally? There are advocates on both sides of the divide. Interestingly, I’ve counted more in the “Worse to come” camp than the “Get stuck in now before it’s too late” brigade. But is there a third way? I believe so.

While the bears certainly have a case, many of them are managers left behind in a rally that has seen the UK up by 30 per cent and some emerging markets by significantly more. Not just shares, either. Commodities have also enjoyed an uptick.

Talking the market down has become a necessity for those sitting on piles of cash. Markets bottom when you least expect. Moreover, you do not know it has happened until after the event. Dismissing the green shoots is a no-brainer if your next performance ranking will be downgraded by excessive caution.

But what if we have seen the bottom but not the true recovery? In other words, March might prove the over-reaction on the downside, but the justification for the subsequent bounce – an early end to the recession, resulting in a classic V and a rebound in economic activity and market values – may yet prove ill-founded.

At last week’s Cofunds platform conference, there was plenty of support for such a view. With a theme of Weathering the storm: investment opportunities in a recession, speaking were three multi-managers, two bond fund gurus and one pure equity player (Aviva’s David Lis). Lis was cautious on the strength of the recovery but saw value in individual stocks. The others were not too far apart either.

Two points emerged. First, planning for bad times needs to take place when markets are buoyant. Second, advisers tend to be followers not leaders – it is telling that emerging markets, a recent good performing sector, are popular on the Cofunds’ platform just now.

With the National Institute of Economic & Social Research reporting the end of recession, far be it from me to be a party pooper. But while things might have stopped getting worse, they are far from improving. We may yet see better buying opportunities than today. However, the bottom could be behind us.

Brian Tora (brian.tora@centaur.co.uk) is principal of the Tora Partnership

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