Richard Harris: We are going back into an era of range trading: Richard Harris, Port Shelter Investment

Does the market take relief from the fact that the Fed is once again moving into data dependent mode and the comfort is being drawn from a stable inflation environment?


I do not think the Fed has really changed its ideas. It was always data dependent and it has always said that. What Chairman Powell said was pleasing to the market, it relaxed it maybe a little bit but the reality was that the market was looking to recover anyway!

The price earnings multiples are extremely cheap around the world. We are all worrying about Apple and Apple is only 11 times! We are not at bubble territory yet. We are at levels at which people can see value and come through. What has happened is we got a big scare in the last quarter because people were thinking growth is going to continue forever. Now they are a little bit more circumspect about the growth picture and prices are probably closer to where they should be.

Some would argue that the so-called FAANG stocks are not richly priced but the economic data for 2019 from America may not be all that encouraging. The sugar rush from tax cut maybe getting over, the economy is unlikely to expand and contraction pressures could be evident in 2019?


That is right and my roadmap looking forward is that the kind of momentum trades that people have been accustomed to those days are probably over. If you look at the FAANGs in particular, they are starting to split apart.

If you look at sort of an Amazon or a Google or even a Microsoft, which have developed well diversified businesses in parts of the economy that are growing. Then you look at Apple and Apple fundamentally is a manufacturer although it does have an important ecosystem that is very important for its future growth.

Then you look at stocks like Facebook which in a sense is a one-trick pony. What we are going to see is people starting to be much more careful about the kind of investments they make. We are going to get much more back to stock pickers’ environment. It is going to be become much less momentum driven which means that exchange traded funds, the passive sector may finally stop losing out to the active sector.

We are going to go back into an area of range trading. When you look at it historically, maybe it will quieten down markets. No highs are being broken, no big lows are being made but just range trading going on. So, people are going to have to be an awful lot clever.