A tale of two markets: Speculative market in growth stocks gives cause for concern but optimism lies elsewhere

Caution required to get through uncertain times

Covid-19 has driven the global economy into one of its greatest ever economic downturns. Paradoxically, despite a recent pullback, global equity markets are now trading near their February highs before the pandemic hit.

What has resulted, are two very different markets: a speculative market in 'growth' stocks and 'the rest.' We hear about these growth stocks in the press every day. In the US, Tesla is a poster child. In Australia, it is Afterpay. There are many of these companies, literally hundreds, that have been given huge valuations. While the prospects of many of these companies may be brilliant and their growth runways may be long, in our view, the price that investors are paying for them today make them extraordinarily high-risk investments. The maths simply does not add up. If the brillian...