Market News

Market Update - April

16/04/2015

Kate Rogers

Kate Rogers

Head of Policy, Co-Manager - Charity Multi-Asset Fund, Cazenove Charities

Divergence continues

Divergence of economic fortunes across the globe continues. The US and UK economies, having expanded, are now contemplating the prospect of interest rate rises. Conversely Europe and Japan continue with loosening monetary policy and quantitative easing.

Developed economies benefit from lower oil prices

Lower oil prices are positive for household spending. This, combined with a strong US dollar, has biased global growth towards the developed markets. In the Eurozone, lower energy prices, a depreciating euro, stronger banks and quantitative easing should all help lift economic growth this year and next.

Election uncertainty

The general election in May is set to be one of the most unpredictable elections in the UK’s history, as smaller parties capitalise on voters’ disenchantment with the mainstream parties. This adds uncertainty and there is limited prospect for positive market surprise, whatever the result. The most likely outcome, a coalition or minority government would find it difficult to agree on economic and budget policies, prolonging the uncertainty and delaying austerity plans.

Market implications

Global equities have continued to generate positive returns as inflation remains low and expected interest rate rises in the US and UK are delayed. Both European and Japanese markets have performed well this year, benefitting from the tailwinds of a weak currency and loose monetary policy. UK equity markets are touching 20 year highs, although valuations remain reasonable.

Government bond yields across most developed economies continue to trend lower and we remain convinced that bonds are expensive. Any normalisation in yields could cause significant capital losses, and we believe that risks are skewed to the downside. As such, we continue to favour equities over bonds. For diversification, where appropriate, we retain our preference for property given 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 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.