From Mr Roger Lawson.
Sir, As investors, we expect to be bombarded with too much information, a lot of which will be contradictory. But your August 6 edition of FTfm was surely taking it a step too far.
On page one, in the lead article, it said pension schemes are reversing the rush out of equities into fixed income because bond yields are now very low in comparison with those on equities. For the first time since the 1950s, equities yield more than government bonds and have done for some time. This reversion to what used to be seen as normal (because equities are perceived to be more risky and hence investors should expect a higher return) comes after the recent move towards bonds – in response to regulatory changes since 2000. Before this, during the 1980s and 1990s, bonds were shunned because of the risk of inflation; and equities were seen to provide both capital growth and growing dividends, with some hedge against inflation.
So pension fund managers are now buying equities for income. Well that makes sense, does it not?
But turn to page two of the same publication, and the headline is: “Demand for equities fades.” This report says that enthusiasm for equities across Europe’s fund managers has dwindled, according to MHP Communications, a PR company. This is based on a survey of fund managers’ expectations for future returns.
It brings to mind the Rudyard Kipling poem entitled If ...
“If you can keep your head when all about you
Are losing theirs and blaming it on you ...”
Perhaps a suitable motto for all investors?
Roger Lawson, Chairman, ShareSoc (UK Individual Shareholders Society), Chislehurst, Kent, UK
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