Investment Reviews News

Investment Bulletin August 2013

08-October-2013 14:11
in General
by Admin

The end of May and through June was very disappointing. Markets tumbled when Ben Bernanke, chairman of the US Federal Reserve stated the obvious. He told us that one day the US authorities would slow and then stop printing so much new money. Bond yields rose globally and international stocks markets fell.


Our portfolios stood the test well with results outperforming the associated markets.


Market Outlook

We thought the reaction was overdone. Any sensible observer knows that one day the Fed has to stop printing money. The announcement resulted from much better US economic growth prospects and whilst it was not a surprise, the timing was unexpected. Not only did bond prices fall sharply, but all other main asset classes; equities, property, gold and commodities; were sold down too. For a short period this exaggerated market reaction to the news continued.


We have been watching developments in bond markets closely and we do not expect short-term interest rates to increase on either side of the Atlantic for at least another year.


Commodity price falls have also undermined the immediate prospects of some emerging economies, whilst political strife in Egypt, Syria, Turkey and Brazil have not helped.


Will Markets See Another Autumn Rally?

We have for many months argued that the US is the best of the West. This has proved to be true. Although the US market is now more expensive than it was, we still prefer it to other major western markets. The combination of cheap energy, the shale gas revolution, the leadership in digital technology, and a stronger banking sector are all pluses for share investors in America.


Further progress in world markets also rests on a continuing period of quiet for the Euro. Angela Merkel, the German Chancellor, is seeking to avoid a flare up in the long running Euro troubles ahead of the German election in September. An accommodation has been reached with Greece, which still cannot hit all the targets required, and the Portuguese problems are being carefully monitored.


Eurozone Green shoots

The Eurozone desperately needs the economy to return to positive growth. The recovery is likely to remain uneven, with most of the growth being generated in core Europe.


Growth in lending and investment will be key if the Eurozone is to achieve a sustainable recovery against the backdrop of fiscal fatigue. The economy is on the right path a year on from Draghi’s promise to do “whatever it takes”.




Market Round-Up

Our investment strategy has been and remains to be diversity - holding complementary assets so that we focus on minimising losses during the downturns with the plan that healthy market exposure will benefit from the market upturns.


We still think that strategically emerging economies are going to grow faster and do better than the western advanced countries in the aftermath of the Credit Crunch. However, in recent months there have been interest rate rises and other tightening policies in a range of these countries, from Brazil to China.


We expect the period of normalisation. In particular, asset classes such as equities and bonds are likely to be significantly more volatile. Looking ahead, we remain positive about the prospects for growth-related assets but more cautious about bonds.


Much of 2013’s global investing landscape and my scenarios above depend on whether Washington navigates the fiscal cliff and strikes a long-term budget deal. We will be monitoring and reviewing this situation, and others, as they unfold through the year.


This bulletin provides information, it is not advice. Any opinions are given in good faith and may be subject to change without notice. Opinions and information included within this document does not constitute advice.


 (If you require personal advice based on your circumstances, please contact me.)

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