A recent article in Money shares the views of a panel of market experts (including Rob Arnott, Jim Paulsen and Liz Ann Sonders, among others) regarding the state of the bull market and the risks and opportunities they see going forward. Here are some highlights:
- Can the bull market persist? While Sonders remains bullish, she says, “I think we have to start to be mindful of some of the risks.” Paulsen adds that he doesn’t see elements of a bear market, but does see signs of a “rougher” environment in 2018, and suggests that investors might want to be a bit more conservative.
- How frothy is the market? Arnott underscores the dispersion in valuations (as indicated by the CAPE ratio) between the U.S., Europe and emerging markets, adding that while he is not suggesting that the end of the U.S. bull market is imminent, “there are pretty high odds for a ‘lost decade’ for equities going forward.” Sonders weighs in that, while the market is not inexpensive, it “has been in overvalued territory for pretty much this entire bull market. And it was pretty much overvalued during the entire 1990s bull market.”
- Where are the best opportunities? Sarah Ketterer of Causeway Capital doesn’t think focusing abroad is necessarily the best strategy: “I think this market globally has become narrow and euphoric and completely blindsided to risks.”
- Where are the bargains? Floyd Tyler of Perserver Partners says there’s a lot of overvaluation in some of the typical defensive sectors, but that investors should “look for discounting situations, event-driven situations.” Paulsen thinks the energy sector is appealing.
- What could trigger a selloff? A geopolitical event, says Tyler, or a series of rate hikes. “It has to be something that leads to forced selling, so something that causes a lot of redemptions and it just starts to sort of spiral.” Arnott, on the other hand, says “looking for a trigger is always dangerous, because catalysts by definition are always a surprise.”
Paulsen concludes, “I’m more cautious than I’ve been for a while.”