YOUR PORTFOLIO Performance chasing
Growing interest Most managers agree that the bond market offers heavy hints about the best way to tilt your portfolio . Fahad Hassan , chief investment officer at Albemarle Street Partners , says that when bond yields and inflation are falling , quality stocks outperform . After economic growth bottoms out , yields start to rise , and growth stocks do best . As the real economy catches up with the financial economy , inflation and bond yields rise , and value stocks are the place to be . While this year ’ s environment of surging inflation and interest rates should in theory be perfect for value stocks , it is only commodities that have rallied – apart from these , most “ cheap ” stocks are also down . However , Richard de Lisle , manager of the VT De Lisle America fund , says investors need to look at longer periods than the past six months . “ We have been in a value market since the bond top of September 2020 ,” he claims . “ After vaccine Monday , value went on a run for four months until March 2021 and vastly outperformed growth in all markets . We must remember that value is the
What goes up …
The perils of performance chasing are laid bare when you compare the gains of the most lucrative asset classes in each of the three decades up to 2010 with their returns in the next 10 years . To begin with , the MSCI Japan index made 1,575.8 % in the 1980s , before halving in value by October 1990 . It didn ’ t return to its peak for more than 26 years .
The IA Technology and Technology Innovations sector made 782.2 % from inception in July 1991 up until the turn of the millennium . It then lost 57.1 % over the following 10 years , when cigarette manufacturers came out on top : the FTSE 350 Tobacco made 742.8 % between 2000 and 2010 . This index bucked the trend of a collapse , with gains of 125.3 % in the next 10 years , but it still fell well behind the tech bull run .
long-term winner . This is because when it goes for it , you really feel it .” After this four-month period , the market was hit by headwinds such as the Delta and Omicron variants of Covid and a slowdown in China .
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