The Great Monetary Experiment continues. In 2009, central bankers introduced us all to the weird alchemy of quantitative easing to get us out of the financial crash. To everyone’s surprise, they are still at it 10 years later, even though there are growing doubts about its effectiveness with interest rates already at rock-bottom.
Fears of recession are rising steadily in the investment community. Fortunately, central bankers are not sitting on their hands waiting for recession to happen: since the beginning of the year they have collectively transformed the outlook for interest rates. Equity markets have responded with double-digit gains since the low point just before Christmas last year.
A year ago in this column, Keith Wade, chief economist at Schroders, issued a stark warning to investors. He said: “Very few people think the markets will be as good in 2018 as they were 2017.” That proved quite an understatement. The FTSE All World index, which covers shares in 50 markets, ended 2017 up 22% – its biggest rise since the financial crash. However, a year later it had lost almost all of those gains, mostly in the final febrile months of 2018.
The mood in financial markets changed quite dramatically in the second week of October. More specifically, Wall Street, which had seemed to defy gravity all year, finally cracked.
Diversification is often described as ‘the only free lunch in town’. The theory goes that by diversifying your investments across a range of asset classes, geographies or investment styles, you can potentially reduce risk and volatility within your portfolio. Effectively, you are not putting all your eggs in one basket.
Despite apparently benign market conditions, our panellists have become more cautious in their outlook.
In the run-up to F&C’s 150th anniversary, manager Paul Niven explains why he prioritises asset allocation over stockpicking.
Our expert panellists are not convinced that Donald Trump's economic policies will be uniformly good news for business and growth prospects.
Unattractive bond markets, low growth and political risk are concerning our panellists, as they position for long-term sterling weakness.
Doomsday Brexit predictions may have been overdone but its early days and caution prevails despite some cheer regarding US and Japanese equities.