Jonathan Ruffer: tech stocks have become “long-duration assets”
As with bonds, tech stocks are now held not because of that they are, but because of what investors fear if they don't hold them, says Jonathan Ruffer, chairman of Ruffer Investment Management.
Consider what “the easy route to a successful portfolio in 2020 would have been”, says Jonathan Ruffer, the founder of the £20bn asset manager that bears his name, in his latest letter to investors. First, hold firms such as Amazon “where Covid-19 has blown a mighty following wind”. Second, recognise “that pressure on central banks to cut interest rates further would be irresistible” and buy government bonds before they did so. If you did either, you had a very good year. “But a change in a single variable will sideswipe both those asset classes at the same time. Their dynamics feel very different, but actually, they are not.”
In the eyes of the market, the long-term earnings power of tech stocks has become “more and more valuable” when “discounted at lower and lower interest rates”. They are now “long-duration assets” (ie, their value is very sensitive to changes in interest rates). So their fate will be closely linked to that of bonds.
At this point, investors hold tech because people “fear not holding these stocks”. They hold bonds not for income, but because of “the chess game that plays out between the authorities and the investment community”, under which markets feel they have policymakers trapped “in low-yield (pushing into no-yield) territory”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
![https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg](https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748-320-80.jpg)
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
When sentiment and circumstances change, so will the calculations that prop up both asset classes. “If inflation comes about – or, rather, looks a realistic possibility – you won’t see government bonds or tech stocks for dust.”
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Revolut finally bags a UK banking licence – what's next for the fintech?
Revolut has finally been granted a UK banking licence following three years of negotiations with the regulator
By Kalpana Fitzpatrick Published
-
Could Labour impose a “double death tax” of more than 50%?
Speculation is mounting that capital gains tax will be reformed in the Budget - and one option is to charge bereaved families the tax on top of inheritance tax. We explain how it could work
By Ruth Emery Published
-
UK mid-caps: an improving outlook
UK mid-caps have perked up and the rally may run further, but long-term investors should remain selective
By Cris Sholto Heaton Published
-
The tobacco industry is going smoke-free - how to profit from it
Tobacco companies have realised their traditional products are on the wane. But new opportunities have opened up – and should prove lucrative
By Rupert Hargreaves Published
-
Is it time to invest in creative industries?
Any industrial strategy should not overlook the creative industries, one of our top national assets
By David C. Stevenson Published
-
Is Mercia Asset Management set for success?
Mercia Asset Management helps the government fund smaller companies in Britain’s regions. Should you invest?
By Rupert Hargreaves Published
-
British stocks set for a boost
British stocks are due for a bounce as the UK looks more stable compared to many economies
By Alex Rankine Published
-
Ocado shares jump by a fifth
Ocado takes a turn for the better after attractive profit forecasts were announced
By Dr Matthew Partridge Published
-
The AI boom is on borrowed time
The hype around the AI boom could be on its way out – but why?
By Alex Rankine Published
-
Diploma: a blue-chip set for strong growth
Diploma, whose niche products include seals and fasteners, serves an array of growth markets. Should you invest?
By Dr Mike Tubbs Published