Allen Bond: This is what motivates investors

Allen Bond: This is what motivates investors Since the start of the Coronavirus pandemic, only in three months, the equity markets have witnessed the deepest recession in eight decades. Today, markets have rebounded nearly back to their pre-pandemic peaks. The pandemic had a significant impact in many fields around the world. Perhaps the biggest impact was on the global stock markets, which have suffered from instability over the past five months. In spite of this fact, the Nasdaq and S&P 500 index are at an all-time high. So what is motivating investors? The answer came from Allen Bond, managing director and portfolio manager at Jensen Investment Management. Bond believes that the economy has started to recover since its last recession in March. However, instability continues and company bankruptcies continue to increase as well. S&P 500 profits are expected to decline too, while there is a major disconnect between capital market returns and economic stability. “Market often reflects investors' future perspectives. In this case, investors are willing to look through an earnings decline in 2020 due to the belief that a successful vaccine and other relief efforts will set the stage for sustainable growth in 2021 and beyond. Investors continue to be motivated by the same factor they are motivated by in less volatile times: long-term return objectives. Low interest rates create challenges to these objectives, nudging investors to take more risk in the equity markets.” Bond added. Bond also thinks that the economic recovery will not occur linearly. Rather, structural economic changes are expected as a result of efforts to mitigate the epidemic. “These changes are likely to result in winners and losers among businesses, industries and ultimately stock prices. In such an environment, we believe it is crucial to "know what you own" and that high-quality stocks can positively differentiate from the overall market.” said Bond.   You might also be interested in:

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