COVER STORY
cheapest and most expensive stocks is in the highest 2 % range since 1990 . “ Think it ’ s all over ? It ’ s hardly begun ,” he adds . “ VT De Lisle America is on a trailing P / E of 9x , yet is growing earnings at the same rate as many of the high-multiple growth funds , as our commodity and industrial stocks actually like this environment .”
The right side of history Yet growth managers point out the world has changed since the 1970s .
Monks Investment Trust ’ s manager Malcolm MacColl says four of the most dangerous words in investment are “ reversion to the mean ”. “ I ’ m embarrassed to admit I studied economics at university , as lots of the concepts peddled to us seem silly in retrospect ,” he explains . “ One of the silliest was that of the steady state . Mean reversion relies upon the world staying roughly the same , therefore if you buy something that is 20 or 30 % cheap relative to the long-term average , you will do well .” MacColl says the problem is the world is constantly changing , pointing to the numerous retailers that looked cheap 10 years ago , but
The Russian bear Russia ’ s invasion of Ukraine has added yet another parallel between today and the post-dotcom bubble landscape , when the market reached its bottom as the US and UK prepared to go to war in Iraq . The bad news is a bear market can last a lot longer than the decade-long slump of the 2000s .
“ Look at Japan ,” says Coombs , pointing to the asset bubble of the late 1980s when investing in the Topix at its peak meant you would still have been down 26 years later .
Fortunately , he doesn ’ t envisage the current slump lasting quite so long , saying the uncertainty caused by the war in Ukraine could , bizarrely , help to stop the slide .
“ Central banks may feel rising energy prices will dampen growth , so rate rises could be less than the market has been discounting ,” he says . “ I could make a short-term bull case for growth if that were the case . On the other hand , central bankers will be so nervous about stagflation , they could ramp up rates even higher . I ’ m not willing to bet investors ’ money either way .”
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