The June wobble aside, Western equities have been the asset class of choice this year. Not everything has gone one-way of course – the MSCI EM index has fallen 2% – but then that’s the very nature of investment.
In an interview discussing Witan’s latest results, the trust’s CEO Andrew Bell spoke for many when he characterised 2013 as a year of “relief”.
“After four or five years of economic adjustment and stop/start in terms of market optimism, people genuinely seem to think that the outlook for the world economy is improving, and perhaps more to the point the risk of slipping back into the abyss has reduced,” he said.
Buying dips
“They’ve started buying the dips rather than selling the rallies if you like. And so the markets have been, I think for most people’s money surprisingly strong this year, considering that growth has been all right but fairly anaemic.”
Commentators often talk of an element of ‘surprise’ in the way markets have rallied this year, though I think that’s been overstated. If investors were really so uncertain, they wouldn’t have invested in the first place and money has certainly gone back into markets, though admittedly there is still considerable cash sitting on the sidelines.
According to the Society of Trust and Estate Practitioners’ (STEP) latest Trustee Managed Portfolio Indices (TMPI) report, wealth managers’ low, medium and high risk portfolios have all seen increased equity weightings in the five years to end June 2013.
Interestingly, the biggest increase has been in the low risk mandates, which have allocated an extra 11% to the risk asset during the period (rising from 22% to 33%).
Safe bet?
Whether that’s aggressive alpha plays or defensive blue chips is not clear, though shares are back on the agenda as something of a safe bet… and have been for some time.
The big macro news this week has been the emergence of the eurozone from 18 months of recession, the consequences of which could well fuel further rises in global markets for the remainder of the summer.
‘Cautiously optimistic’ is the term so often used in the City, though as portfolio strategist Cheryl Rowan makes clear in the latest Bank of America Merrill Lynch Global Research Report Our Response to the Skeptics, “if investors are approaching the market with caution, it usually suggests that prices are not overheated.”
A full analysis of the TMPI stats and commentary will feature in the September edition of Portfolio Adviser, out soon.
