All bull rally leaves investors wondering what to own


People switch to the New York Stock Exchange on Thursday, July 30.

The Associated Press

As assets from all walks of life recover and the S&P 500 Index approaches new records, investors face a dilemma: stay or exit.

The surge in US stocks, Treasuries and gold prices came to the brink of simultaneously climbing for the first time in history, while recoveries of once battered assets like oil, financials and the euro accelerated. The S&P 500 is up 50% from its late March lows.

“We are in the ‘all bull’ business,” said Christopher Stanton, chief investment officer at Sunrise Capital Partners. “There are very few losers. Only latecomers.

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The widespread gains presented investors with a conundrum. While many are worried about owning assets that appear to be richly valued or are trading at record highs, holding too much cash or a disproportionate allocation to underperforming stocks has hampered the portfolio’s performance in the recent rally. .

Another concern is the possibility of a large turnaround where assets that have appreciated in tandem sell simultaneously, leaving investors with few places to hide.

Such market action was seen on several occasions during the coronavirus-induced liquidation in March, when gold, stocks and Treasuries fell together as frightened investors went for cash.


Many investors believe the rallies should continue as long as interest rates stay low and the Federal Reserve continues to launch stimulus – factors that have benefited everything from tech-related stocks to commodities such as oil and gold.

And while some investors are concerned that the S&P 500 is increasingly skewed towards technology and communications services – which account for around 39% of the benchmark’s market cap – these sectors also accounted for around 39% of earnings. of the index in the second quarter, according to IBES data from Refinitiv.

“We always love companies that are tech-driven and create efficiencies in a post-COVID world,” said Conor Delaney, managing director of the Good Life Companies financial advisory network.

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Among its holdings are shares of Zoom Video Communications Inc, a bet that the shift to work from home caused by the coronavirus should not be reversed anytime soon.

Meanwhile, a 9% drop in the dollar index from its peak this year has given another positive wind in gold, which is denominated in US dollars and becomes cheaper for foreign buyers when the note green depreciates.

George Gero, managing director of RBC Wealth Management, periodically advises clients to increase allocations to the safe haven metal to protect against everything from political uncertainty to a future surge in inflation.

“We are staying the course,” he said. “I believe gold is going higher.”


Others think the solution is to sell now and wait until things get cheaper.

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BofA Global Research analysts noted that August marks the start of what has historically been the weakest three-month period of the year for stocks, where the historical average return is around 0%. , according to bank data.

Investors withdrew $ 6.5 billion net from U.S. stocks last week, the largest outflows in a month and a half, the bank said.

Persistent buying on wild dips and twists in stocks of companies “that don’t make sense” have convinced Sébastien Galy, senior macro strategist at Nordea, that the markets could enter a euphoric phase that tends to precede corrections.

“We have told our investors that they should reduce their positions slowly and carefully,” he said.

Other potential volatility hotspots include a reversal in the dollar’s bearish trend, a worsening coronavirus outbreak or a contested US presidential vote, investors said.


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Some have reoriented their orientation towards so-called value stocks, which are concentrated in economically sensitive sectors that have tended to mount strong rebounds during the rebounds of recessions.

John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, owns financial and industrial stocks as well as tech stocks in hopes that a COVID-19 vaccine will boost economic recovery next year.

Past rebounds in value stocks have often come at the expense of dynamic stocks, said Solomon Tadesse, head of quantitative equity strategy for North America at Societe Generale.

One of those moves came over a three-month period in 2009, when value stocks gained 25% while moose names lost around 30%, Tadesse said.

“It’s a short window and if you miss it, you miss it,” he said.

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