Why the next bull market is unlikely to look like the previous one

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It’s likely the next bull market will look more like a conventional one, driven by profitability rather than revenue growth, experts say

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“It’s interesting,” says Myles Zyblock, chief investment strategist at Dynamic Funds in Toronto. “You go to Walmart Inc., something is 20 per cent off and it seems like a deal, but it doesn’t seem that way with investing when it probably should.” Certainly, not all investors are reluctant, says Lesley Marks, chief investment officer of equities at Mackenzie Investments in Toronto.

Yet, if Deloitte’s outlook proves correct, equities may rebound by the middle of the year as investors anticipate gross domestic product growth.One catch is the next bull market is unlikely to look like the last one. “It was like there was zero gravity with nothing holding stock prices down,” he adds about ultra-low interest rates.Consequently, thematic, high-growth stocks of the previous bull market – i.e. meme stocks like AMC Entertainment Holdings Inc.“Zombie companies, kept alive by [ultra-low] interest rates that probably shouldn’t have been living, may disappear because they likely don’t have enough net earnings to cover their interest expenses,” he adds.

In fact, oil and gas companies’ recent focus on disciplined capital allocation could be the blueprint for success for companies across many sectors, Mr. Moroz says.

 

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