almost 4 years ago • 2 mins
Several big banks and hedge funds have been warning investors off stocks recently, cautioning that markets may well be in for further falls. Now, however, both JPMorgan Chase and BlackRock, the biggest investment manager around, are recommending that it looks like a good time to buy after all. But is there more to this than meets the eye? 🤨
Goldman Sachs, Elliott Management – even most super-rich individual investors, as polled by UBS Wealth Management, think holding off on buying more stocks for the time being is sensible, given a remarkable recent rebound that may turn out to be overdone. But BlackRock, which looks after some $6.5 trillion of client cash, begs to differ.
In a blogpost published Tuesday, the firm argues that now is in fact a good time for investors to reduce their holdings of government bonds and up allocations to riskier investments. According to BlackRock, the surging popularity of super-safe US government bonds has pushed down yields to a point where the relative returns potentially offered by stocks (as well as emerging-market bonds) look attractive.
Investment bank JPMorgan agrees. It’s been positive on stocks since mid-March – and in new analysis this week suggested, among other things, that the unprecedented economic response to the coronavirus from governments and central banks means long-term damage to growth will be much less severe than after the 2008 financial crisis 🤞
If you buy into the firms’ assumptions, then buying into more stocks may make sense – and BlackRock’s five-year time horizon here means that it’s not just being opportunistic.
But both firms have an ulterior motive in encouraging investors to chop and change their portfolios. JPMorgan’s trading business – which makes money from just such activity – is fresh from its best-ever quarter, while shrinking stock prices reduce not only the value of BlackRock clients’ pots but that of its percentage fees 🤔
What’s more, BlackRock’s CEO predicted privately this week that higher taxes and mass bankruptcies may soon be on the way in the US – hardly good for stock prices. Investors might want to sit tight for now after all…
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