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COCK AND BULL STORY?

It has been a long bull market but the party has to end, warns Jim Wood-Smith. The trouble is identifying when that will be

The problem with the dying days of an equity bull market is that it is difficult to be sure when it will end and how high it will go in the meantime. This, for Jim Wood- Smith, chief investment officer for private clients at Hawksmoor Investment Management, is the key dilemma in today’s markets. As he says: “We can see what will happen but we don’t know when.”

Cautious approach

For Wood-Smith, there are clear reasons to believe that the bull market is drawing to a close. Markets managed to shrug off unprecedented uncertainty – Brexit, Trump – with apparent ease, and valuations have climbed higher and higher.

Maybe it is a new era, he says, but “it’s different this time” has proved to be a dangerous assumption in financial markets.

Wood-Smith points to technology valuations as a sign that equity markets have become alarmingly high in some cases. He says: “The biggest risk is that investors start to conclude that Google owner Alphabet can’t really be worth 180x earnings. Once this technology bubble starts to crash, it would probably bring the whole wider equity market down with it.”

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