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The stocks are in ruins this year – but not everyone is impressed.
Several investors kept their enthusiasm tempered even as the market rebounded after a correction. While global equities rose 11 percent this year, $ 46 billion was withdrawn from stock funds, according to Bank of America Merrill Lynch.
This dynamic created what some strategists have called a "no flow" rally, in which equities had the best start of the year in 30 years, as investors pulled money out of the money. 39; shares. In other words, their dislike for the stock was not in sync with the other forces that drove the market upward.
According to Alain Bokobza, head of Societe Generale's global badet allocation and badet allocation strategy, investors need to keep abad of the "fierce struggle" between bullish and bearish forces.
In terms of keeping the market afloat despite cash outflows, share buybacks remain one of the strong drivers of gains in this bull market. The corporate tax reform drove share buybacks to a record high last year and 2019 is already on the brink of going beyond this milestone, according to BAML.
However, many investors do not share the same enthusiasm for the future share price.
"Risk aversion is now very apparent and portfolios already cover many risks," Bokobza said in a recent note to customers.
"Cash balances have also become very important as the prospect of a US recession in 2020 does not bode well for risky badets."
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According to other strategists SocGen, a recession in the United States next year is not exaggerated. In a separate note, Arthur van Slooten and his team identified the yield curve and their exclusive indicator of economic news coverage as two indicators suggesting that the next recession could occur as soon as possible.
This risk partly explains why some investors stood out of this rally and even pulled money out of stock funds. SocGen noted that more and more of them are turning to cash rather than risky badets; it seems that they allow for many calls to keep more dry powder and take advantage of higher yields.
Mr Bokobza pointed out that monetary policy is still loose, that fears of a large-scale trade war between the US and China could fall and that the UK could reach an agreement on Brexit.
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Mr. Bokobza is not calling on investors to dispose of risky badets, as he expects some of the storm clouds that have gathered will soon disappear. But he recommends a cautious "barbell" approach, with three strategies that should help investors remain exposed to equities without being burned. They are described below and quoted directly by him:
- "We are not keeping up with the current pace and keeping our weight on equities at 40% because we have maintained our position at the end of last year, although we have raised our index targets. shares compared to the previous quarter, see the disadvantages in the summer of 2020.
- "We are strengthening our allocation to yield-seeking badets, which is now the number one priority for investor reallocation, clearly driven by the very accommodative asymmetry of global central banks.
- "We place a high value on risk control by adding badets with resilient characteristics and / or decorrelating (for example, a reduction in volatility) to our allocation."
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