Cool heads urged as disconnect grows in markets

Patrick Poke

Livewire Markets

MFS Chief Investment Strategist, James Swanson, has sounded a warning to yield chasers in his latest note. "Lately, we have witnessed a growing disconnect in the financial markets too. Asset class after asset class continues to rise in value despite stagnant global economic growth and flagging corporate profits... The "chase for yield" has pushed up traditional high-dividend payers like REITs, utilities and telecom stocks to historically rich price/earnings multiples." Equities are not a substitute for bonds, he explains, as boards are not required to pay dividends to shareholders, and they are historically 3x as volatile as bonds. "Stock investors need to be particularly mindful of potential economic inflection points. History has shown that markets often become the most euphoric at the most perilous point in the economic cycle." He suggests investment-grade credit, which he says is not "at extremely rich price levels" as an alternative for yield-hungry investors. Read more: (VIEW LINK)


Patrick Poke
Patrick Poke
Managing Editor
Livewire Markets

Patrick was one of Livewire’s first employees, joining in 2015 after nearly a decade working in insurance, superannuation, and retail banking. He is passionate about investing, with a particular interest in Australian small-caps.

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