Why are Equities so Unloved?

Despite a six year bull run, many investors are still sceptical about the equity market - while lack of dotcom bubble hysteria is positive, investors are missing out on gains

Henderson Global Investors 30 July, 2014 | 12:01PM
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This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, Wouter Volckaert, an investment manager in the Henderson Global Equities team, examines why so few investors are bullish on equities.

The MSCI All Country World Index is up around 100% since bottoming on March 2009, the FTSE 100 Index is up 90% and many stock market indices are trading near all-time-high levels. We are six years into a bull market rally and by now you would expect to hear your mother-in-law bragging about her latest investment triumphs or to receive hot trading tips from your taxi driver. However, none of this is happening.  Some behaviour associates with a mature market cycle: star fund managers are able to raise billions for new funds, merger and acquisition (M&A) activity is picking up, any company seems to be able to raise public money – but stories of newfound riches in the stock market are not reaching us. In fact, this feels like the most unloved bull market I have ever witnessed.

In order to understand the disparity between share price returns and investor sentiment, we need to look at the bull and bear arguments. Let’s start with the positives: Economic data is improving. It’s been a slow recovery since the great recession of 2008 but we are moving in the right direction.

The US is grinding higher and Europe seems to be emerging from its double-dip recession. Some of my colleagues just returned from a meeting with the International Monetary Fund (IMF) in Greece and many will be surprised to hear that Greece is now expected to deliver one of the faster GDP growth rates when compared to Europe.

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Henderson Global Investors  Henderson Group PLC is engaged in the provision of investment management services.