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As students of the market, the ACG Investment Committee is constantly poking holes in our outlook to see where we may have it wrong and to discover what we could do differently – uncovering opportunity so to speak.

The thing that has had us perplexed is the speed by which fear enters the market during sell-offs. We had nonchalantly thought the conditioned mind of millions of investors was to avert pain at any cost – not wanting to experience a repeat of 2008 they were thus selling at the earliest hint of red.

While that reasoning is sound we did not appreciate the degree to which most retail investors are barely invested in equities. An informal poll of wealth managers suggests that cash holdings are generally much higher than usual as are holdings of hybrids – securities that pay a yield and have potential for capital growth such as MLPs, REITS, preferreds, convertibles etc. etc. Growth equities are generally underweight if not completely absent.

The rapidity of the selloffs in the Fall suggests to us a market dominated by professionals rather than the investing public which is consistent with the low volumes over the last 3 years. Thus if the public has not yet entered into the market in the way they have done in prior bull market tops (1999 and 2007 for example) this five year old (historically) long bull market may yet have a while to go to higher prices.

As hard as it is to believe, the area of the equities poised to offer the best returns are likely the ones that have already done well and are restructuring the very core of industry – think of the new economy tech companies. We are not saying this market will move higher uninterrupted – we would expect more hair raising falls – but the general trend should be higher and a lot higher for some of those stocks.

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By Greg Silberman
Atlanta Capital Group
Chief Investment Officer

Securities offered through Triad Advisors, Inc. Advisory services offered through Atlanta Capital Group.