Long-time market-beater Geoff Wilson believes that we are in the final stages of the longest US bull market in history.
The distinguished investor has led listed investment company (LIC) WAM Capital Limited (ASX: WAM) through various crashes such as the GFC since it launched it 1999 – since then its portfolio has returned 17.5% per annum before fees and expenses.
He had some ominous words for shareholders, saying (I added emphasis on the key part):
“Over the last decade, central banks have pumped an unprecedented level of liquidity into the economic system, lowering interest rates to record levels and driving asset valuations to extremes.
The recent stock market rout has wiped out the 2018 calendar year gains in the US, while China’s equity market has fallen by nearly 30% from its peak earlier this year and Australia has entered a technical correction. I believe we are in the final stages of the longest US bull market in history. What concerns me most is that all bear markets are extremely painful.”
I’m not sure what the advantage to Geoff Wilson would be in saying this if he didn’t believe it. All good things must come to an end, including unprecedented bull runs.
In his letter Mr Wilson also suggested that Labor could worsen the economic downturn in Australia with its policies on franking credits and negative gearing. Wilson Asset Management have a petition aimed to pressure the politicians to maintain the current franking credit system.
What action is WAM taking to cope with a bear market?
In the various LICs WAM has been building up the cash weightings to withstand the volatility. It will also mean that WAM has sufficient cash to take advantage of opportunities when they arise.
Chief Investment Officer Chris Stott to retire
Geoff Wilson also announced that CIO Chris Stott is set to retire from his role to spend more time with his young family, although he will continue to be a director of WAM Capital and WAM Microcap.
Hopefully his departure will not mean a reduction of WAM LIC returns. Hopefully it isn’t an omen of an impending market crash either. I wish him all the best. Perhaps one day he may return to a more active role at WAM?
Geoff Wilson seemed to indicate he will take on the role as CIO. He pointed out there is still a quality team running WAM Research Limited (ASX: WAX), WAM Microcap Limited (ASX: WMI), WAM Global Limited (ASX: WGB), WAM Leaders Ltd (ASX: WLE) and the other LICs.
No-one can truly know when the next bear market will hit. But, each week that goes by brings us closer to the next one. It’s inevitable with rising interest rates – it acts like gravity on valuations of all assets.
If a bear market is just around the corner, I’d want to make sure that this very defensive share is a part of my portfolio.
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Motley Fool contributor Tristan Harrison owns shares of WAM MICRO FPO and WAMGLOBAL FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.