Fresh fear lurking for global financial markets
16 April 2018 London
Image: Shutterstock
Fresh fear is lurking in the global financial markets, according to Tom Elliott, international investment strategist at deVere Group.
Elliott, whose comments come amid increased market volatility in recent weeks, said that the fear is not solely related to concerns of an impending trade war between the US and other major economies, but rather that the global gross domestic product may have peaked in its current growth spurt.
He also noted three key factors that are adding to investors’ nervousness, including the potential trade war, the apprehension that a new wave of regulation will impact business models of some of the US’s largest quoted companies, and growing tensions between the US, UK, France and Russia following last week’s attack on Syrian chemical weapons installations.
However, Elliot explained that fundamentals remain supportive for stocks. Consensus estimates for global corporate earnings growth in the first quarter are at 15 per cent over the previous year, while for the Standard & Poor's 500 index it is 17 per cent.
He said: “The beleaguered US tech sector is expected to see 22 per cent earnings growth, which will help sooth investors’ nerves. Despite the prospect of two, maybe three, more rate hikes from the Federal Reserve this year, and probably one from the Bank of England in May, monetary policy remains loose by historic standards in all the main economies.”
“This supports risk assets, by keeping borrowing costs low for companies and their customers, and by keeping ‘risk free’ rates low and unattractive relative to the expected returns from stocks.”
Elliott concluded: “Despite new geopolitical concerns, our investment positioning remains unaltered.”
“We favour a long-term, multi-asset approach to investing, whereby investors choose a suitable combination of global equities and bonds—depending on their risk profile and investment horizon—and leave the portfolio unchanged. Too frequent rebalancing ensures winners are sold and losers are bought—which financial history, and common sense, supports.”
Elliott, whose comments come amid increased market volatility in recent weeks, said that the fear is not solely related to concerns of an impending trade war between the US and other major economies, but rather that the global gross domestic product may have peaked in its current growth spurt.
He also noted three key factors that are adding to investors’ nervousness, including the potential trade war, the apprehension that a new wave of regulation will impact business models of some of the US’s largest quoted companies, and growing tensions between the US, UK, France and Russia following last week’s attack on Syrian chemical weapons installations.
However, Elliot explained that fundamentals remain supportive for stocks. Consensus estimates for global corporate earnings growth in the first quarter are at 15 per cent over the previous year, while for the Standard & Poor's 500 index it is 17 per cent.
He said: “The beleaguered US tech sector is expected to see 22 per cent earnings growth, which will help sooth investors’ nerves. Despite the prospect of two, maybe three, more rate hikes from the Federal Reserve this year, and probably one from the Bank of England in May, monetary policy remains loose by historic standards in all the main economies.”
“This supports risk assets, by keeping borrowing costs low for companies and their customers, and by keeping ‘risk free’ rates low and unattractive relative to the expected returns from stocks.”
Elliott concluded: “Despite new geopolitical concerns, our investment positioning remains unaltered.”
“We favour a long-term, multi-asset approach to investing, whereby investors choose a suitable combination of global equities and bonds—depending on their risk profile and investment horizon—and leave the portfolio unchanged. Too frequent rebalancing ensures winners are sold and losers are bought—which financial history, and common sense, supports.”
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