The month promises the triggering of Article 50, Dutch elections and more central bank meetings, which investment manager Jaisal Pastakia believes could make for a “bumpier” ride for markets in the coming weeks.
While the events are all expected, Pastakia, a manager for Heartwood Investment Management, recommended investors keep a reasonable level of liquidity to make the most of any opportunities that arise.
He believes the markets may have even further to go, despite the hurdles throughout the month.
“Based on this more sanguine view of higher US growth, a stabilising Chinese economy and rising momentum in the eurozone and Japan, there is reason to believe that markets can make further progress from here. Nonetheless, the journey might be bumpier over the next few weeks as markets digest several headline events,” he said.
The US Federal Reserve will confirm if rates will rise in mid-March, which would push treasury yields and the dollar higher if it went ahead, while Pastakia sees more risk to investor sentiment following the triggering of Article 50 and the impact of Brexit politics.
The impact of a populist win in the Dutch elections, though perhaps unlikely, has been relatively ignored by markets, Pastakia said, but it could in fact lead to more nervousness around the French elections and German elections later in the year.
He added: “All of these events are of course well flagged, but they also represent potential areas of vulnerability to market sentiment: the impact of higher US interest rates and a strengthening US dollar, downside risks to UK growth and the disruptive potential of populist politics.
“That said, fundamental data improvements are coming through globally and fourth quarter corporate earnings have generally surpassed expectations.
“In our view, if we were to see any potential dislocation in markets this might be viewed as a potential opportunity. It is therefore worthwhile holding reasonable levels of liquidity, which can be deployed as necessary.”
