Matthew Sherwood: What investors can learn from Einstein’s average

Albert Einstein once said, “If you have one hand on a hot plate and one hand in a freezer, on average you will be comfortable.” Rather like Einstein’s “average” man, market analysts boil these arguments down to two alternatives; either markets were overvalued and overdue for a correction, or global recessionary risks have increased. So while investors may think that future returns are likely to be lower (which they are) they also need to be cautious about painting all asset classes and all regions - and all the sectors within each asset class - with the same low-return brush. Even if “average returns” were set to be zero, that means half of the market players should outperform and rise. The key at this juncture of the cycle is looking for assets that have reasonable valuations. Equities are a better option than bonds and the key then is identifying countries (and sectors) where earnings per share growth is being upgraded and policy stimulus likely to be maintained. To read more from Matthew Sherwood click the (VIEW LINK)