Is it really time to pile back into global equities?

In the Gulf News last week columnist Rick White uttered the immortal words 'pile into equities, pull your money out from under the carpet', or something very similar. OK, so he sells mutual funds for a living, so he would say that wouldn't he? But maybe he has a point.

Certainly in equity markets those bold enough to buy at the bottom do best in the long run. The question is now, are we at the bottom or are we still heading there? Well, actually we are off the bottom seen last March; the problem is will we move higher from here or move back lower again?

Nobody can be sure. Rick White's argument is to get into the market now, ride-out the cycles and you will be fine.

That works if markets resume their long term upward rise. As Japan in the 1990s shows a move sideways for a decade is possible. What if it took a decade for Western markets to recoup their 2000 highs?

It is not difficult to present such a scenario. For one thing, stock valuations are on pretty high multiples today and that cramps the possibility of upward movement. Then again profit rises in one sector may be balanced by a decline in another thanks to Chinese competition, high oil prices and other factors.

Such a flat-line future would mean that money invested in equities today would do well to keep up with inflation. And let us not forget that global inflation seems to be on the rise, and with it interest rates - both generally enemies of share price rises.

Of course, even in this environment some mutual funds would outperform, but as an asset class performance would be dismal.

Another point is that investors who always hark back to the last asset class to put in stellar performance seldom do well. And why should the mid-2000s be a re-run of the late 1990s? Just one good reason would be welcome.

So often in investing the next big asset class is not the one just behind you but one that few people have actually spotted yet. My money is on gold and oil but that is the subject for another time.