The previous record low of six months was hit just after the 2008 crisis. In 1999, for example, 14 months was the average.
Europe displays a similar trend, with holding periods shrinking to less than five months, from seven months last December.
Rob Almeida, a portfolio manager at asset manager MFS, said for years mom-and-pop punters, commission-free investing and more machine-trading have contributed to the trend. But 0 per cent interest rates, trillions of dollars of central bank and government stimulus and high levels of uncertainty caused by the pandemic have added to the momentum.
“Capital doesn’t have a price thanks to all this stimulus,” Almeida said, “The Covid-19 crisis has accelerated the trend of short-termism in investing.”
Meanwhile, there’s little clarity on companies’ future earnings, the economic outlook and the pandemic outcome.
“So what’s happening is this ability to act or trade or churn, whatever you want to call it, based on information that may not be material,” Almeida said.
Turnover ratios, the percentage of portfolio holdings that are replaced in a 12-month period, increased to 92 per cent at end-June, from 85 per cent a year ago for a group of global multi-asset funds tracked by Lipper.
The trend has ensured rich returns for nimble traders but also poses questions about market stability once stimulus fades.
Market short-termism was highlighted as far back as 2010 by Bank of England chief economist Andrew Haldane who described it as “subconscious myopia”.
But buy-and-hold investors have had a rough year so far.
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