The rally that we witnessed last week has yet again proved to be a dead end and there has been a small pull back in most markets as a result. Yet again Europe seems to remain rudderless and after countless summits and conferences, the only real result seems to have been some €30 billion released to Spanish banks and a further entrenchment of policy by Germany and now even Finland against a Eurozone bond type of undertaking and coordination. This has driven the Euro lower and, we feel, it still has some distance to go, whether it can last even in to the medium term in its current format is a debate for a much longer article than this one but we would encourage clients with large Euro deposits to get in touch and discuss a wider portfolio of currencies.
Further to the worry with the Euro, we also feel that the Swiss Franc is coming under almost unbearable pressure too and could possibly see itself being re-pegged, again in the not too distant future.
After last week’s lower than hoped for non-farm payroll numbers out of the US the market is watching Mr Bernanke’s every move as he has previously committed to a further round of Quantative Easing should the US recovery slow any further. This has happened and now we’re waiting with baited breath. However, in our opinion this has given a buying opportunity for some targeted purchases. With some early signs of life in the US housing market we would still perhaps not advise jumping back into property development companies per se but, as with our oil and gas industry strategy, look at supporting and ancillary sectors with wider revenue streams that are not only pegged to one “commodity” price. They are underpriced in our mind and will, in the medium to long term, provide ample growth with relatively low volatility.
China has shown signs of a “slowdown” but given its traditional blistering pace of growth and hawkish behaviour of policy makers we remain bullish on the country, its appetite for consumer and luxury products seems to know no end providing perhaps well priced buying opportunities for the companies here in Europe and the US that cater to this appetite.
In the UK we see, in conjunction with the additional quantative easing a further possible rate cut occuring. This would punish savers and deposit holders even further and with the average interest rate already being so low it’s easy to see that cash is losing value now even faster. Those with fixed term deposits and large cash holdings should be diligent to check on their rates and when each one matures to avoid waste.
With cash rates so low there has been a rush to the “safe haven” of bonds producing lower yields, for those seeking to add value to the portfolios we would encourage, where possible, a longer market view or a focus on dividend stocks which still offer higher returns than most fixed instruments but with the combined advantage/disadvantage of possible price movements.
Politically there is not a lot on the immediate agenda so the markets can get back to focusing on actual results as opposed to sentiment driven reactions, a welcome change in our view!
For more information on the above and anything else which might be of interest please don’t hesitate to get touch with us at MyQROPS.net.