Market News

Market Update - September

18/09/2014

Disparate recovery pattern continues...

Whilst growth in the US and UK has been strong, European activity has faltered as the global economic recovery becomes more disparate.  Recent GDP data has shown a continuation in healthy US and UK growth.  These robust economic figures and strong demand for staff may add to inflationary pressure through wage increases in these markets. In contrast Eurozone activity has weakened as Italy slipped into recession, Germany contracted and France stagnated.  In Europe, weak wage growth and lower commodity prices have added to worries about deflation and prompted pre-emptive action from the European Central Bank (ECB) who unexpectedly cut interest rates and confirmed further asset purchases.

Interest rates on the up?...

Whilst European monetary policy is still easing, the UK and US are moving towards 'tightening', in the form of tapering in the US and eventually interest rate rises in both economies.  It is becoming increasingly apparent that the growth characteristics and potential upward pressure on wages justify a gradual upwards movement in rates both sides of the Atlantic.  Although arguably this should be sooner rather than later, both sets of policy makers are cognisant of delicate sentiment.

Scotland decides

Whatever the outcome of the referendum today, the political landscape in the UK has changed.  A ‘yes’ vote carries many economic uncertainties for both Scotland and the rest of the UK, around currency, trade, fiscal and monetary policy, to name a few.  A ‘no’ vote still has significant ramifications and the implications will take many months and even years to fully understand.

Market implications

Equities remain our favoured asset class as the potential for earnings growth remains, despite the heightened geopolitical risk.  The recent pullback in sterling provides some relief for UK corporate earnings, a meaningful proportion of which are generated overseas.  It appears that emerging markets are starting to benefit from the recovery in developed markets and we are becoming more constructive on the outlook for that region.  Bonds are unattractive in valuation terms and uncertainty around the Scottish referendum is unhelpful for UK government bonds.  We continue to find opportunities in commercial property with attractive income and the potential for income growth through strong corporate performance.  Absolute return is held as a defensive asset instead of bonds where appropriate.

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

Giles Neville

Head of Charities giles.neville@cazenovecapital.com
John Clifton

John Clifton

Business Development Manager
Telephone:
john.clifton@cazenovecapital.com