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Trust , said : “ The dramatic changes set into motion by the giant tech companies on the west coast of the US and the east coast of China are still largely underappreciated , despite the size and the scale they have reached already .”
John Bilton , global head of multi-strategy at JP Morgan Asset Management , agrees with him , saying technological advances could help to prop up the bull run for a sustained period from here and that investors could miss out on significant gains if they try to apply outdated views on valuations to markets over the long term .
“ This is the first year where we have had cause to call out potential upside risks and technology is one area we have focused on a great deal ,” Bilton explains . “ There has been a lot of focus on technology and many commentators have been trying to understand what it may or may not do to the industry , to the workplace , to society in general .”
“ Productivity has been remarkably low since the financial crisis ,” he continues . “ It is not unprecedented , but it is very low . And technology is often associated with improvements in productivity . We predict the large number of technological innovations that will become mainstream in the coming decade will accrue positively , improving productivity over the longer run .”
THE OTHER SIDE OF THE COIN Not everyone is convinced by these arguments , however . FE Alpha Manager Neil Woodford says the most dangerous words in the world of investment are “ it ’ s different this time ” and is convinced we are firmly in bubble territory .
“ Whether it ’ s Bitcoin going through $ 10,000 , European junk bonds yielding less than US treasuries , historic low levels of volatility or smart beta ETFs attracting gigantic inflows – there are so many lights flashing red that I am losing count ,” he says .
While Woodford ’ s short-term performance has been poor , he has a habit of being on the right side of history in previous crises – he avoided tech stocks in the dotcom bubble in 2000 and banking stocks in the financial crisis in 2008 .
Jason Hollands , managing director of Tilney , says that while every time a market index tests new highs it provides a cue for perma-bears to warn of an impending crash , in reality corrections are extremely difficult to predict with any accuracy .
“ Long-term investors should try not to get too distracted by such attempts at tea-leaf reading and instead focus on well diversified strategies that balance risk and opportunities ,” he adds . “ Bull markets don ’ t die of old age , they are typically stifled by either a deterioration in economic fundamentals , policy errors by central banks ( either tightening too aggressively or allowing asset price bubbles to get out of control ) or triggered by unforeseen shock events .”
It is also worth considering the words of Andrew Roberts , RBS ’ s research chief for European economics and rates , who said : “ Sell everything except high quality bonds . China has set off a major correction and is going to snowball . Equities and credit have become dangerous , and we have hardly begun to retrace the ‘ Goldilocks love-in ’ of the last two years .”
This recommendation was made almost exactly two years ago , since when the MSCI Global index is up by more than 50 per cent . •
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