In the world of investing, timing can be everything. The current atmosphere within the equity markets brings this principle into sharp focus. Zain Nizami from UBS raises a pivotal point that investors should carefully consider: the importance of taking profits in a timely manner. Amidst the backdrop of positive performance levels and increasing concerns about concentration risks in equities, there seems to be a general reluctance to alter investment strategies or realize gains. This perspective, while optimistic, may border on complacency, suggesting a need for a strategic revaluation.

Nizami’s counsel leans towards the wisdom of preemptive action. In his view, it is far more judicious to take profits “when you can, and not when you have to.” This advice is not without its context. The landscape of the equity market is currently marked by a significant absence of new long positions from systematic funds as we approach the earnings season. Coupled with this is the anticipated reduction in corporate buybacks, a factor that has traditionally provided a reliable support level for the market.

A particularly striking observation is the stability of the S&P 500, which has not experienced a decline of more than 2% for over a year. This unusual calm raises questions about the future direction of market volatility and the sources of additional market support, should current conditions waver. The lack of clear drivers for further upside presents a compelling case for caution.

The undercurrent of Nizami’s advice is clear: the current market conditions may offer a strategic opportunity for investors to secure profits and reassess their positions. The absence of a significant downturn in recent history does not guarantee the perpetuity of this trend. In fact, it may hint at the potential for increased volatility ahead, making the case for taking profits now even stronger.

Moreover, the anticipation of a more favourable entry point in the near future serves as an additional incentive. By adopting a cautious stance today, investors can preserve their capital — or “keep dry powder,” as Nizami puts it. This approach not only safeguards against potential downturns but also positions investors to capitalize on broader upward movements when they do occur.

The current sentiment in the equity markets offers a classic illustration of the tension between risk and reward. While the temptation to ride the wave of positive performance is understandable, the considerations highlighted by Zain Nizami from UBS underscore the value of strategic foresight and caution. By taking profits in a timely manner, investors not only protect their gains but also maintain the flexibility to navigate future opportunities more effectively. In essence, the counsel to take profits “when you can” reflects a broader strategy of prudent risk management, ensuring that investors are well-positioned to benefit from the market’s next broad move higher.