Politics
Geopolitics adds some frisson of excitement every now and then, but in spite of the recent weakness in markets, there still seems to be a degree of complacency on the part of investors. The Greek saga continues to fascinate and the market reaction to the approaching denouement will demonstrate just how much investors have already discounted the various possible outcomes.
While it is hard to make the case for an aggressive market rally, even in the environment of equities moving sideways, there are opportunities to be had.
Investors prepared to keep doing the hard lifting can identify and take advantage of valuation anomalies. Over the next six months, simply owning a market may not be enough and to see decent returns one will need to generate alpha.
This does add an element of risk since alpha is not always positive, but the upshot is that while markets in general only promise to offer lacklustre returns for the next couple of years, it is still possible to find stocks whose value prospects offer strong growth over the same period. We may well be back in a stockpicker’s market.
Andrew Herberts is head of private investment management (UK) at Thomas Miller Investment
EXPERT VIEWS: GLOBAL EQUITIES
Gareth Lewis, chief investment officer at Tilney Bestinvest, says:
“The abnormally loose monetary policy pursued by the US Federal Reserve appears to be doing much to harm the recovery with excessive stimulus becoming trapped in the financial system through refinancing, share buy-backs and M&A, rather than stimulating the wider economy. While the market is obsessing about higher Fed rates, the rise in bond yields seen in the past two months has already tightened monetary conditions for the corporate sector, suggesting a greater headwind for US corporate earnings in the second half of the year.
Economically we see only tentative signs of recovery, with some pick-up in the eurozone and Japan being offset by the continuing slowdown in China and Asia. As a result, the case for a sustained increase in rates seems unjustified, with any increases likely to be modest and focused entirely on economies in the US and possibly the UK.”
Adrian Lowcock, head of investing at Axa Wealth, says:
“At the start of the year global markets were expecting Mario Draghi to announce quantitative easing (QE) in full. Expectations were high and investors were not disappointed by the result, with Draghi announcing a level of QE that was higher than expected. European markets had already begun their ascent in January and markets rose strongly in the first four months of the year.
