The Great Rotation

I recently read two interesting articles, one from Pramit Ghose of Bloxham Wealth Management and one by James Salt in yesterdays Irish Independent.

Both commentators elude to a swing in market sentiments by investors moving out of bonds and into stocks. This move or 'The Great Rotation', the title of this BLOG, was coined by Michael Harnet and Kate Moore (both equity strategists at Bank of America Merryll Lynch) who argue, it will profoundly affect what does well and what does poorly.

Their thinking is in 5 year increments whereas Mr Ghose goes out on a limb and has bravely given a 10 year forecast something which he says he's never done in his career before believing it to be too long a time period to be judged on and also nobody will recall or care about it when you are eventually proved correct or not!

So why is Mr Ghose now making this bold prediction......because he truly believes we are in the early days of a return to the 'CULT OF THE EQUITY' that will see equity markets double over the next decade and break the grip of this current bear market that started 12 years ago.

The huge question obviously is when does it start and what will be the signals?

Essentially clients are being asked to move back into an asset class which has fundamentally let them down in the last decade. One of the key drivers is for the normalisation of property valuations which lead to either the Federal Reserve or the ECB to raise interest rates to make investors consider radically altering their asset allocations. We've no way of predicting how much longer the slump in the housing market both here and abroad is going to last to give the impetus to the economy to start confidence in equities to return.

Perhaps the message for us all is to let others take the plunge and reap the rewards of the big early gains! For the rest of us perhaps we should be satisfied in joining in once the trend is well stabilised!

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