LONDON: Defensive equity strategies focused on high payouts and steady earnings have gained in popularity this year as investors flock to safety, worried the biggest stock market rally in decades is about to come crashing down.
"You have your equity market that's up 16per cent but low volatility is beating it. You certainly don't expect that in any other bull market," said Nick Alonso, director of multi-asset at PanAgora Asset Management in Boston. The interest from prospective clients in Panagora's defensive equity strategies fund has more than doubled from the same period last year, he added.The extent of investor mistrust toward the stock market's relentless rise is apparent in surveys such as Bank of America Merrill Lynch.
A dramatic U-turn by global central banks combined with an escalating trade conflict have made investors uneasy about the economy and uncertain about where markets go next, with all eyes on a critical meeting between U.S. President Donald Trump and Chinese premier Xi Jinping over the weekend. Global stock markets have had their best first-half returns since 1997 and yet the risks to the rally are clear.