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There will be "almost no prospective returns" from U.S. stocks over the next decade because the market is fully valued following years of gains, according to the global strategist at Allianz Global Investors, which manages $569 billion.
As Bloomberg reports, low interest rates and bond purchases by central banks have left cash and many other asset classes "significantly mispriced," Neil Dwane said Monday as part of a panel discussion on long-term investing at the Toronto Global Forum.
"The U.S. is fully valued," said Dwane, whose firm is owned by Munich-based insurance giant Allianz SE.
"There’s almost no prospective returns for the next 10 years from the U.S. equity market, and therefore investors have to look into Asia or Europe where valuations are significantly lower."
With interest rates close to zero around the world and bond markets "manipulated by central banks," it’s difficult to assess risk and return, he added.
Many investors have turned to high-yield bonds or emerging markets for income, which raises risks.
Dwane is not alone of course in this ominous view, as Bloomberg notes, Jim Keohane, chief executive officer of the Healthcare of Ontario Pension Plan, agreed that it’s not a good time to be buying assets of nearly any stripe.
"Right now assets are very expensive," said Keohane, whose firm manages more than C$70 billion ($54 billion).
"We need to be patient, to wait for better opportunities. Whenever the next crisis comes, assets are going to be on sale. You can buy them a lot cheaper than you can buy them today, but you have to have patience to be able to do that."
And finally, John Hussman, of Hussman Funds, warned that a century of reliable valuation evidence indicates that the S&P 500 is likely to experience an outright loss, including dividends, over the coming 10-12 year horizon, and we presently estimate likely interim losses on the order of -60% or more.
A rate of return of even 1% in cash is a much more desirable option than investors may imagine.
For a while, Bernie Madoff’s investors felt great about their impressive “returns.” For a while, investors in dot-com stocks felt the same. For a while, investors in mortgage bonds felt the same. But when investors focus on returns rather than the very long-term structure, stability, and even existence of the underlying cash flows, terrible things can happen.
All that’s required to get the snowball rolling is the creeping recognition that there’s no “there” there.
In response to the delusion that low interest rates “justify” virtually any level of market valuation, regardless of the growth rate of the underlying cash flows, the speculation of recent years has created a situation where there is effectively no way out for investors in aggregate. Every security that is issued must be held by someone until it is retired.
When one investor sells a share, it simply means that another investor buys it. The only question is who will hold the bag.
The American Petroleum Institute (API) reported a huge draw of 5.087 million barrels in United States crude oil inventories, largely in line with an S&P Platts’ survey of analysts that expected inventories would draw down by 1.4 million barrels for the week ending October 27—continuing the extended drawdown in recent weeks. Gasoline inventories, according to the API, saw a major draw of 7.697 million barrels for the week ending October 27, against an expectation of a much more modest draw of 1.7 million barrels. Other analysts,…
Treating as potential act of terror
The driver of the rented HomeDepot truck drove down a popular bike and pedestrian path in lower Manhattan. There are reports of 6 deaths and up to 15 injured - some seriously. The drive of the truck got out of the truck with a fake gun and was shot by
WTI posted a 5.2% gain in October, the first back-to-back monthly advance this year, and held up near the highs of the day into the API print. WTI/RBOB kneejerked higher as the data hit showing large inventory draws across everything...
Crude -5.087mm (-1.3mm exp)
Gasoline -7.697mm (-1.55mm exp)
Big product draws in the previous week - and a modest crude build - bucked the recent trend but tonight's API data shows huge draws across everything...
Expectations that OPEC’s cuts are “tightening the market supply-demand fundamentals continues to drive prices higher,” Gene McGillian, a market research manager at Tradition Energy, told Bloomberg.
There is “a little bit of profit-taking and that’s why the rally seems to have kind of stalled. But, I don’t think we have any indications that the rebalance has completely been priced into the market”
The reaction was an immediate algo-buying panic then modest fade...
Jay Hatfield, portfolio manager at the InfraCap MLP exchange-traded fund, told Bloomberg, "inventories are in good shape. Demand is quite positive globally. We’ve been appropriately bullish."