By Tom Mackenzie and Nico Grant
(Bloomberg) --F. William McNabb, Vanguard Group’s chairman, cautioned investors to consider reducing their stock exposure before the nearly 9-year-old rally ends.
“We would expect the next decade to actually be very modest on the equities side in the U.S., a little less so in Europe and a little less so in Asia,” McNabb said in a Bloomberg Television interview that aired Thursday. “But it’s still overall lower than long-term historical averages.”
Stock markets reached a fever pitch in 2017 as the S&P 500 Index hit record highs and the rally has continued this year. The advance, buoyed by low interest rates around the world, economic growth and the U.S. tax overhaul, has sparked concerns that valuations have gotten stretched, spurring some investors to brace for a decline.
McNabb, whose firm oversees about $5 trillion, said long-term investors may benefit by holding balanced portfolios with bonds as well as stocks.
“No one can predict what’s going to happen in the next 12 months,” he said. “Having just said that, I’m sure the equity market will continue to skyrocket for the next few months.”
McNabb, who ceded the role of chief executive officer of the Valley Forge, Pennsylvania-based firm to Tim Buckley this month, spoke to Bloomberg in Beijing, where Vanguard is eager to take advantage of China’s opening to foreign financial-services companies. The country’s government said it plans to remove ownership limits on banks and allow overseas firms to take majority stakes in local ventures.
“With some of the changes, it looks like there may be a path to doing retail mutual funds, depending on how things get interpreted,” McNabb said.
China’s assets under management are poised to climb more than fivefold by 2030 as the world’s second-biggest economy grows, according to estimates from Casey Quirk by Deloitte.
To contact the reporters on this story: Nico Grant in New York at [email protected] ;Tom Mackenzie in Shanghai at [email protected] To contact the editors responsible for this story: Margaret Collins at [email protected] Josh Friedman, Dan Reichl