Markets looking surprisingly robust, but will it last?

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1. Are you positive or negative on the investment markets today?

2. Are clients locking in profits and why?

3. What's your thoughts on the opportunities in China?

4. What are the specific risks we should be considering today?

Video transcript

1. Are you positive or negative on the investment markets today?

We remain negative on the markets, but our worry is that the central bankers will keep the party going for much longer. We've seen some incredible amounts of money that have been put into the markets over recent years with quantitative easing. We thought that game had finished, but unfortunately it hasn't. We began the year looking for ways in which we could take our money out of the market and try and batten down the hatches for more difficult economic times, and we're still in there. We're still moving with the markets. We're still committed to the markets and for the moment with central bankers saying they may indeed cut some interest rates rather than increase them, the markets may still have upside momentum, which we have to stay engaged with.

2. Are clients locking in profits and why?

As we've gone through a kind of quarterly reporting season, talking to clients and explaining how well their portfolios have done in the first quarter. Many of them rather than looking happy are going, oh my God, I've got a problem. And that problem is I really need to lock that profit in and probably disengage from this rally that we're seeing. I would say it's been quite a turn in recent weeks where the clients are going 15% on equity markets, sounds like too much. Take me out, and then clearly that's more difficult because if you're in a balanced portfolio as a manager you remain committed to something like a 50% in equities and we don't want to reduce that to 30%. So often you have to re-profile the client and move them down one notch in the risk spectrum of the types of products that they're owning.

3. What's your thoughts on the opportunities in China?

I was in Beijing last week and I hadn't been there for a couple of years. I have to say with all of the negativity you see, particularly Western press and the concerns about trade wars, China continues and it's not just flatlining, it actually continues to improve. And amongst the Chinese I found a great deal of confidence, and it's just their way of thinking. So when we talk about the long term, they said all of our long term problems were solved last year. And then you think again, of course now we know who's going to be leading that country probably for the next two or three decades. So having laid down that really fundamental cornerstone of the future of China, a lot of the Chinese are now very convinced their economy's going to do well. So I expect to see that equity market, even though it's rallied 45%, to make further good progress.

4. What are the specific risks we should be considering today?

I think the greatest risk out there at the moment is still the day that people wake up to some of the fundamental problems we've got, whether it's the climate change issues, whether it's the aging populations, and perhaps more fundamentally the very expensive valuation that many asset prices are on, relative to those now medium term prospects, which are difficult. I keep saying to people, if you're telling me about a great upside on a product or a portfolio - for example talking to a client today - a 5% yield. I said, but ma'am, your bond could fall 20% to 30% in normal circumstances, let alone should we go back to the environment we had in 2007, 2009. So the risks are economic slowdown that takes the money away from the market, purely because people extract it and the market just can't absorb that selling pressure and asset prices fall precipitously.

More videos from Gary Dugan, DALMA CAPITAL - Global CEO Office

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