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COLUMN-Secular stagnation? Markets lap up "secular stability": McGeever

(The opinions expressed here are those of the author, a columnist for Reuters.)

LONDON, July 18 (Reuters) - For all the talk of secular stagnation, lasting scars from the global financial crisis and investors paralyzed by fears over another imminent crash, there's precious little evidence of any of it in financial markets right now.

Yes, bond yields are low by historical standards, thanks to a surplus of global savings and years of powerful central bank bond-buying stimulus. But markets are reflecting investors' widespread and deep-rooted belief: extremely bullish.

Several market outlooks in recent weeks from a variety of banks, funds and investment houses managing trillions of dollars of investments reveal an overwhelming consensus that growth will remain steady, stocks will continue rising and market volatility will stay low.

Blackrock, the world's largest asset manager, reckons the global economy is only half way through its expansion, and says the historically low level of stock market volatility can persist for years.

Eric Lonergan at M&G Investments says the industrialized world is as close to "economic perfection" as you can get and dismisses "secular stagnation" as "patently at odds with the facts." If anything, the global economy and markets are experiencing an unprecedented period of "secular stability."

World stocks are their highest ever, led by record highs on Wall Street , equity market volatility has never been lower, global economic growth is its strongest in six years and corporate profit growth its strongest in seven.

Investors are putting their money where their mouths are. According to the latest monthly survey from Bank of America Merrill Lynch, fund managers are loading up most on bank stocks, U.S. and European credit, and euro zone equities, according to BAML. Hardly signs of fear and loathing taking hold.

Cash holdings stand at 4.9 percent of portfolios. That's slightly above the 10-year average of 4.5 percent, a level above which sends a contrarian stock market "buy" signal, BAML notes.

So even in light of all the bullish talk, portfolios still aren't yet fully invested. By this measure, the green light for further equity gains won't be switching to amber soon, far less red.

Only 12 percent of those surveyed say internet stocks are in "bubble" territory, and more than half reckon the Federal Reserve reducing its balance sheet will be a "non-event" or "risk on" for markets.

There are risks to the current Goldilocks scenario, including the Fed (and possibly other central bank) policy tightening, a bond market crash, a sharp slowdown in China, and increased political instability in Washington or elsewhere.

But these risks have been raised, analyzed and discussed at length in recent months. Even in illiquid, summer markets it's hard to see what the catalyst that will puncture what some observers say is complacency.

Ten years ago, then Citigroup chief executive Chuck Prince delivered a line that perfectly summed up the buoyant mood permeating global banking and financial markets. "When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing."

Investors are dancing today and show no sign of changing their tune any time soon. (Reporting by Jamie McGeever)