Market News

Market Update - March

24/03/2015

Kate Rogers

Kate Rogers

Head of Policy

Developed economies benefit from lower oil prices

Lower oil prices and a stronger US dollar has biased global growth towards the developed markets. However, the acceleration in the growth of developed economies is likely to be offset by weaker growth in emerging markets, where the oil price fall has hurt producers and the dollar strength has hindered exports. Inflation in the developed world is expected to record its lowest rate for five years in 2015, but we expect to see a pick up next year as the impact of the lower energy price fades.

Oil on troubled waters or fuel for the fire?

Oil’s decline will impact the net exporters, with Russia an obvious loser. China and India are set to benefit in emerging markets but, whilst inflation falls, the boost to growth may be limited. In an environment of increasing US interest rates we believe that emerging markets are still looking vulnerable.

European growth outlook improves

In the Eurozone, lower energy prices, a depreciating euro, stronger banks and quantitative easing should all help lift economic growth this year and next. The ongoing Greek negotiations, Ukrainian conflict and upcoming elections continue to provide uncertainty and could enhance volatility. The UK election has the potential to surprise and is most likely to impact sterling in the near term.

Market implications

There has been a change in equity market leadership this year with the US equity market performance outstripped by both Europe and Japanese markets, which had lagged in 2014. We are becoming more positive on the outlook for European equities and recognise that both dollar strength and the relative valuation act as a headwind for the US market. We continue to favour equities over bonds as yields remain low. Bond markets are pricing in deflation and we continue to believe that for medium to longer-term investors valuations remain expensive. Where appropriate, we retain our preference for property to benefit from the attractive income characteristics and absolute return strategies which potentially offer some protection in the event of increased equity market volatility.

 

Important information

The opinions contained herein are those of the Charity team at Cazenove Capital Management and do not necessarily represent the House View. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital Management does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital Management has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital Management is a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

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Giles Neville

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John Clifton

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