Death of Equities’… Again?" FT Alphaville ponders whether sentiment has reached the
kinds of extremes that have historically marked major -- secular -- turning
FT declares “the end of a six-decade passion for equities”. Quite
investors, from pension funds to mutual funds sold directly to the public,
have slashed holdings in the past decade. Stocks have not been so far out of favour for half a century. Many declare the “cult
of the equity” dead.
The story may evoke
a feeling of déjà vu for some. Especially those who read the
August 13, 1979 edition of BusinessWeek, which famously also announced
‘the death of equities’.
took another couple of years for the bear market to end, but what followed
was one of the biggest bull markets in history.
As a long-time
market-watcher, I am acutely aware of the fact that "the crowd"
tends to get overly pessimistic at market bottoms (in fact, for those who
accuse me of being a permabear, I would have them
note my well-publicized calls for a trading rally in March 2009).
notion that share prices are at a turning point akin to what we saw in the
early-1980s is almost laughable given that:
rates back then were at record highs, while they are near all-time lows
ratios three decades ago were testing all-time lows and were half of
what they are currently;
yields were nearly three times as high thirty-odd years ago as they are
fund cash levels in recent years are a fraction of what they were in the
prices had essentially tread water for a decade-and-a-half prior to the
stock market's early-1980s lift-off, while the current malaise has not
lasted nearly as long;
anybody was calling for a major bull market just over three decades ago,
while these days generational bottom-callers seem to be a dime a dozen.
As always, I
could be wrong, but I really don't think, to paraphrase a market cliche, this time is different.
Michael J. Panzner