A flurry of solid economic data has hit the headlines lately, with robust employment figures in the UK and US, rising inflation and strong global growth being reported.
But investors continue to show signs of caution.
Low-volatility funds, offering lower returns, have been continually popular with the IA Targeted Absolute Return Sector being the second best-selling in March, raking in net sales of £381m.
With Brexit negotiations in the pipeline, four years of President Donald Trump in the White House and geopolitical tension in every newspaper it appears investors are trying to weather the perceived risk of a storm, spooked by what they see on the nightly news.
But what can be gained from sitting in a low-volatility, low-return fund to protect against these relatively short-term concerns when investors may be looking at a horizon more than ten years into the future?
Even with a second term, Trump will be just a memory in eight years and the Brexit negotiations will (one day) be consigned to history.
Some exerts say it is time for long-term investors to take on risk to boost returns, and stop letting fear of short-term market moves get in the way.
Mark Dowding, senior portfolio manager with BlueBay Asset Management, says “global growth is relatively robust, monetary and fiscal policy is accommodative, inflation remains stable at low levels and profits are growing”.
He added: “Looking ahead, it strikes us that we may be moving into an environment when the main thing investors fear is fear itself.”
Tilney chief investment officer Chris Godding agreed that the economic data should “underpin risk assets”.
“The overall combination of earnings upgrades and positive indicators on new business orders is clearly a sign of a healthy economic environment,” he added.
