Market Update - July
Higher and higher?...
After a testing start to the year equity markets have rebounded in the second quarter with the US market reaching new highs. Underpinning these moves were signs of better economic activity in the US and ongoing recovery in Europe. We expect the global economic recovery to continue, and are anticipating that the growth in the developed world will gradually spread to the emerging markets through stronger trade.
Looking for income...
Central bankers have also helped sentiment with measures to support growth in Europe and rhetoric designed to quash concerns of US interest rate rises in the near future. Encouraged by this apparent central bank commitment to low interest rates, and the low level of equity market volatility, investors have resumed their search for yield. This has aided property and income biased equity fund returns and is likely to continue to be supportive in the future.
Implications for markets
The economic environment remains positive for equity markets. However, as valuations push higher we expect to see an increase in dispersion of returns within markets and a pick up in volatility. Equities remain our favoured asset class but we see scope for profit taking in the US and UK and a rotation towards those markets which have lagged the rally.
As a result we are becoming more interested in Emerging Market equities. We continue to like property for the attractive income characteristics and struggle to find value in bond markets at these levels. Absolute return funds are included in portfolios to dampen volatility, as an alternative to cash and bonds.
Find additional market views from Janet Mui, Economist at Cazenove Capital Management - July 2014 Economist Outlook
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