Mark Dampier: Opportunities still to take in 'impossible rally'

The Analyst

Stock markets across the world started 2013 in fine form. The bears and soothsayers among us have suggested this is a final fling. I'm not able to call it either way. It is worth noting though that this bull market, which began in March 2009, has been referred to as the "impossible rally".

On 9 March 2009 the Dow Jones stood at 6,547.05 and the S&P 500 at 676.53. Some leading commentators were suggesting that the S&P 500 could go below 500 points. Instead, global stock markets rallied strongly. In sterling terms and with dividends reinvested the S&P 500 is up 124 per cent since 9 March 2009, and the FTSE All Share 116 per cent. Yet given the turbulence of the past few years it doesn't seem this way, which is why I think it is called the impossible rally.

Global economic data has been consistently poor. Half the world has been mired in what could be called a depression. The UK and eurozone don't look in better shape now than four years ago. Investors have simply not believed in the rally.

Discretionary fund managers and private investors alike have been caught out. Most have been highly cautious. Either they have held high levels of cash, standing by as rates on cash deposits fell further, or defensive investments.

The latter, to be fair, have performed reasonably well. The average investment grade corporate bond fund has achieved equity-like returns, growing by almost 50 per cent since March 2009. Yet many investors have been on the sidelines fretting over a break-up of the eurozone, Chinese economic growth slowing, US fiscal problems, or geopolitical tension in the Middle East. These risks have not gone away, but there has been a gradual diminution.

This has been coupled with increased corporate strength. Throughout 2008 and 2009 many companies, fearing Armageddon, reined in costs and strengthened their balance sheets. (If only governments had done the same!) This means many companies are cash-rich, and we are starting to see this feed through to investors via attractive dividend growth and special dividends. The only thing missing is increased merger & acquisition activity, which I think would really spur stock markets on.

Looking ahead you can't rule out a correction. That said, I think any falls could be shortlived. Those on the sidelines who missed recent gains could be desperate to get in, meaning the market could display further strength rather than prolonged weakness. Against this background global growth is creeping up and interest rates show no sign of rising. Plenty of money is being pushed into the system via quantitative easing and the Europeans haven't even started printing money. Unless there is an external shock or "black swan" event I think markets will continue rising.

As for funds, some of those I mentioned when economic headwinds were strongest have performed well. In Europe, the Henderson European Special Situations Fund springs to mind. Richard Pease, the manager, continues to favour companies that can continue growing regardless of the political or economic environment, including those increasing sales in emerging markets.

In Japan, Invesco Perpetual Japan and GLG Japan CoreAlpha have rallied strongly from their low points. Both hold large, export-oriented companies which benefited from recent currency weakness. I don't think valuations look stretched yet.

The UK, on the other hand, is written off time and again by home-grown investors. Perhaps they are too close to see companies are making hay and recent sterling weakness could surely be positive for our exporters. Funds such as Old Mutual UK Dynamic Equity, Standard Life UK Equity Unconstrained and Marlborough Special Situations could merit further investigation. All three have managers I rate highly at the helm and together provide exposure to larger, mid-sized and smaller firms.

I continue to favour using short-term stock market weakness to top up favoured investments. The past few years have shown the hazards of sitting on the sidelines, and for investors able to take a long-term view and some risk with their capital I still see opportunities ahead.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial advisor and stockbroker. For more details about the funds included in this column, visit

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Suggested Topics
Life and Style
love + sex
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Graduate Application Support Analyst

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Reach Volunteering: External Finance Trustee Needed!

    Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

    Christine McCleave: FP&A Analyst

    £36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn