Research: Market View

Market View is a newsletter that provides clients with an easily accessible analysis of financial market developments over the last month. Topics covered include equities, fixed income, other asset classes and selected macro-economic forecasts.

July 2011

In the last month, more weak economic data and ongoing political deadlock in both Europe and the US has continued to buffet global capital markets.

We doubt whether political and economic clarity will dispel the clouds anytime soon, and risk assets could be in for a wet and windy few months - a typical British summer, perhaps.

As a result, we are a little more cautious about capital markets as we enter the third quarter of 2011, and in a balanced portfolio context we have raised our recommended weightings on cash to overweight for the first time. However, at the same time we continue to favour developed market equities, despite the possibility of some volatility. The risky assets that we have trimmed are corporate and emerging market bonds.

We still see this as an soft patch for the global economy, not a reversal, and with July and August will come more information on the health of the US corporate sector, and on the scale of the Japanese recovery from the March Tohoku earthquake. Developed equity markets still look inexpensive to us, and investors trying to fine-tune stock market timing now run the risk of finding themselves stranded outside a rallying market - as many did last year.

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