Financial Advice for Retirement, Social Security, IRAs and Estate Planning

Why to Fear Market Complacency

June 27, 2017

Market volatility has been very low. That not only in stocks but in most other assets. Investors are complacent. They are focused on other things while leaving their portfolios on automatic pilot. This article discusses why low volatility isn’t likely to be a good thing in the long term. It argues that investors need to be a little more fearful about the markets.

“I’m uncomfortable that people are so comfortable with this,” James Audiss, a Sydney-based senior wealth manager at Shaw and Partners Ltd., which manages about $9 billion, said by phone. “I’m concerned about the very, very low volatility levels. But valuations aren’t super stretched, and companies are cashed up. It’s a new paradigm” that’s challenging people’s long-held assumptions, he said.

Some are alarmed enough they’re on the defensive:

  • Olav Chen, who helps oversee almost $30 billion as global head of allocation and global fixed income at Storebrand Asset Management in Oslo, is cutting back on equities.

  • Jeffrey Gundlach, chief investment officer at DoubleLine Capital LP, said this month that traders should raise cash and that the days of low volatility are probably numbered.

  • Bill Gross, manager of the $2 billion Janus Henderson Global Unconstrained Bond Fund, said this month he holds a “large cash position.”

 

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