Investment Newsletter November 2013
Share the Gains By Mike Deverell Investment Manager
Stockmarkets have been back on a fine run recently, with the FTSE 100 hitting over 6,800 during trading on 30 October before dropping back towards 6,700.
past few years. However, as markets rose we generally sold some equity in portfolios at a market level of circa 6,750.
Meanwhile, in the US the S&P 500 keeps hitting new record highs.
This means for most clients that we are now back at a “neutral” equity position. In fact, for some investors we have even moved slightly “underweight”.
This is clearly welcome and has boosted portfolio returns. We hope to see some good returns for the remainder of the year, a period which often sees positive markets – sometimes dubbed the “Santa rally”! Many investors are just jumping onto the equity bandwagon, reassured by the momentum of markets. As usual they are doing so at a point that markets are beginning to look more expensive, and therefore risks are rising. In our ideal portfolios we have generally been overweight equity, in other words holding more equity than we would in “normal” market conditions, for most of the
In many parts of the equity world, stocks are starting to look relatively expensive based on company earnings. In a lot of cases, we believe expectations about future growth in earnings look overly optimistic. We still think UK equities have further room to grow, but stocks are nowhere near as compelling as they seemed 18 months ago. We also believe emerging markets look attractively valued, having been left behind in the recent market rally, and we see further value in Japan. These are areas where earnings are growing strongly and where markets are still priced attractively.
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