(Bloomberg) -- It was one of the best advertised stock-market selloffs in history.
For weeks -- months, even -- prophets of doom have been warning about sky-high equity valuations and investor complacency, as evidenced by historically low volatility. Acting on those forebodings, however, was a different matter.
“The few investors that are talking about risks aren’t really acting on them,” said Simon Raubenheimer, a portfolio manager at Cape Town-based Allan Gray Group Ltd. who oversees the equivalent of about $1.3 billion in four equity funds, on Jan. 31. “That’s the big-picture worry for us.”
Other investors sounded similar warning bells. On Jan. 19, Gavekal Research Ltd. founder and chief economist Anatole Kaletsky said bond yields were entering a danger zone for equities and stocks would suffer a “deep correction” should they head toward 3 percent. That was when U.S. Treasury rates were nearing 2.6 percent -- they have since climbed to as high as 2.88 percent.
Read more here on what’s behind the global equity selloff
Bloomberg reported on Jan. 25 how some emerging-market investors were turning their focus to strategies to avoid losing returns reaped in the past two years of booming equities. Amundi SA, Congest SA and Investec Bank Plc were among those -- but none recommended shedding stocks for safer assets.
- Stephen Jen of hedge fund Eurizon SLJ Capital Ltd. fretted last week that the “self-referencing” of low bond yields and expensive equities left markets vulnerable to a very sharp pull-back.
- Bank of America Corp (NYSE:BAC).’s James Barty warned a taper tantrum and rising yields represented the biggest threat to the equity rally this year.
- Shifting expectations about the pace of U.S. interest-rate tightening could be the trigger for a potentially overdue stock correction, according to Goldman Sachs Group (NYSE:GS) strategist Peter Oppenheimer.
- And don’t forget the crystal ball clutched by the world’s most profitable hedge fund. In a December letter to clients, Renaissance Technologies cited a “significant” risk of a selloff amid high valuations, rising bond yields and frenzied risk appetite.
The list goes on and on.
Even policy makers joined the chorus. A “reappraisal of investors’ view about future risks to global inflation may cause a correction of global risk premia,” European Central Bank Executive Board member Benoit Coeure said as recently as last week.
The question now, of course, is whether this is merely a temporary pullback or the start of a prolonged selloff. There is no shortage of answers.