According to Investopedia, the Nifty 50 was a group of stocks that were most favored by institutional investors in the 1960s and 1970s. Companies in this group were usually characterized by consistent earnings growth and high P/E ratios.
Recently, The Wall Street Journal published an article that started with the statement, “a rally in stocks has triggered unusual circumstances for some of Wall Street’s biggest investors-they are holding many of the same companies.” The article goes on to point out that the overlap among mutual funds and hedge funds, normally with different investment styles, now stands at near record levels.
As Yogi Berra would say, “Déjà vu all over again.”
Investors should be aware that there may be some near-term market risk if portfolio managers react in unison to any changes in expectations. Investors should also remember that the long-term history of the major market indices has reflected the long-term growth in the economy.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA