Hello from Reeves Independent
Here at Reeves Independent we are always striving to keep up-to-date with investment opinions to ensure our clients get the best possible returns for their portfolios! Below is what the experts are saying about the 4th Quarter Investment Outlook
- Global economic growth is diverging, as the US and UK speed ahead of a struggling Eurozone while the economic performance within emerging markets is mixed
- Ongoing geopolitical issues, uncertainty over the direction of monetary policy & global growth concerns continue to linger, resulting in a notable pick-up in volatility in financial markets as we enter the final quarter of 2014 (Smith & Williamson)
- Equities still look better value than bonds & commodities although we are looking to put Bonds in our new Portfolios, which we are currently working on.
- The UK economy is growing well above trend, with most measures of labour underutilisation declining rapidly. Importantly, business investment is on a strong upward trend, which bodes well for longer-term potential growth. At the same time, inflation pressures remain very subdued
- The possibility of Scottish Independence represented a significant overhang for the continued recovery of the UK economy. With uncertainty now removed the Bank of England is free to move forward with its monetary policy.
- In terms of property the improving growth environment is expected to bolster prices in the near term, and yields remain attractive compared to other assets, suggesting strong returns over a three-year holding period.
- The Eurozone economy continues to splutter along, with the region’s core countries, Germany, France & Italy falling further into the deflationary spiral that plagues the region.
- It is suspected market pressure will force the arm of the European Central Bank (ECB) to commit to a full blown Quantative Easing programme to stimulate the European Economy. This is something that we will of course be keeping an eye on.
- The US economy like the UK is growing well above trend (see bullet point 1 in the UK section)
- Markets are watching the Federal Reserve (Fed) most closely of all the central banks. When will the Fed tighten its monetary policy? Jeremy Lawson (Standard Life’s Chief Economist) doesn’t believe this will take place until June 2015 & will be done in a way to ensure that the economy isn’t disrupted greatly. He therefore believes US remains a strong source of support to global growth for some time yet
Asia & Emerging Markets
- Japan’s structural reforms remain outstanding but growing management focus on return on equity and plans to cut corporation tax are supportive, while the Bank of Japan should eventually take more action to reach its inflation target. (Standard Life – House View)
- The Chinese economy is likely to experience a ‘bumpy ride’ over the coming months, says Catherine Yeung, an investment director at Fidelity Worldwide. But she says that a reform agenda recently put in place by the government and stimulus measures will have a positive effect
- With respect to Emerging Markets the performance is increasingly divergent; while some countries benefit from strong domestic fundamentals, others are under pressure from politics, current account deficits and tighter monetary policy.
- India’s new Prime Minister Narendra Modi’s budget was seen as expansive, however it will require time to see the effects on this. However it is believed over the next year or so economic growth should be supported by the recovering U.S. economy that would provide a market for Indian merchandise and service exports.
So what does this mean for our Investors & Portfolios?
- As previously stated: clients still in cash should consider investing due to increased confidence in the economy
- Cautious clients who don’t want full exposure to equities should think about investing in our chosen commercial property funds
- Heavier focus in the US & maintain UK investment. It may however be the time to move out of recovery funds. An area we are currently looking at as we set up our new portfolios.
- Potential to be brave in areas that are struggling i.e. Emerging Markets. Opportunity to buy cheap stocks with a long term view on returns
- Continue to invest but with caution in an uncertain Europe (not including UK) until geo-political issues are resolved & and upside in Emerging Markets returns
- Further opportunities to invest in specialist technology funds. Although it must be stressed some technology funds have done better than others and it may be a time to review your current funds.
- Possible diversification opportunity in China/Japan for long term growth (for the brave!)
If you would like to discuss your portfolio please contact us now on 0191 281 9862 or e-mail firstname.lastname@example.org to arrange an appointment
Disclaimer: This email is not intended as advice and no investment decisions should be made solely on the back of this email. Past performance is no guide to the future. All investments carry the risk that you will not get back what you have put in.