Money managers are becoming increasingly convinced that the end of the business and economic cycle might not be as nigh as some investors anticipate.
Optimism over productivity around the globe, particularly in the U.S., is the key reason for their faith in the current bull run in markets, lasting almost a decade already.
Because some investors are on tenterhooks, awaiting a downturn and positioning in a risk-off way, money managers say they are finding opportunities for investment.
"Last year was the first year since the financial crisis where we had strong, positive growth in all regions globally," said Hani Redha, London-based multiasset portfolio manager at PineBridge Investments, which runs a total $90.5 billion in assets under management. "The drags on the economy are fading — private-sector deleveraging is over and the debt overhang from the crisis has been worked off. We always saw (the period of low growth) as temporary — we never thought it was the 'new normal.'"
PineBridge executives think the market sees the recent boost to growth as a temporary thing, something "not worth paying for. It means valuation multiples have actually come down, because earnings growth has been so strong," Mr. Redha said, referencing recent 25% earnings growth in the U.S.
With valuations materially lower year-to-date, he said, "that is telling you that the market thinks this is a blip and we will then go back to the old days of low growth. And that means opportunities for us."
That's not to say there aren't testing times to come for markets, with volatility expected over the next few months in particular. Managers highlighted the Italian budget process, with the government set to outline new targets and a draft budget over the coming months; the next round of tariffs from U.S. President Donald Trump; Brazil elections in October; and U.S. midterm elections in November.
"But we don't think any of these things really change the strong undercurrent working its way out. We are in a real minority (in thinking) that things are midcycle," Mr. Redha said.