When markets breach all time highs, wise heads become anxious about impending falls
Stronger than expected retail sales in the US pushed the S&P 500 to 1630 on Monday. Meanwhile Japan, the punt in many private client portfolios, has witnessed a 70 per cent rise in the Nikkei since Shinzo Abe started advocating monetary easing in November.
Shinzo Abe's 'Abenomics' has been boosted optimism for Japan's economic revival
To illustrate how easy wealth mangers have found updating clients since New Year’s Day, one need only turn to Asset Risk Consultant’s Private Client Indices. Benchmarking the performance of 49 private client investment managers, these recorded gains of 10.4 per cent in the Equity Risk category in Q1 – slightly more than the entire of 2012, a good year for the markets, which saw an increase of 10.1 per cent.
Smiles will thus be appearing on the faces of many wealth managers as increased risk appetite promises a shift away from low-margin cash and fixed-income products. But before the industry starts predicting a return to the 2005-2007 heydays — when pre-tax profit margins at the private banks were 35 basis points on assets under management — a sense of perspective is needed.
When markets breach all-time highs, wise heads become anxious about impending falls. As any value investor who has read his Ben Graham would say,'There’s no margin for safety', so I’m keeping an eye out currently for insightful research on what will trigger a correction. Steers are welcome…