THE END OF EASY MONEY

With the recent drop in the markets from the highs achieved in January the world’s markets have finally taken stock of the fact that interest rates are on the rise in most major economies and central banks have now begun to unwind bond purchase programs. The latter has been one of the main drivers of the relentless bull market experienced over the last few years since the global financial crisis. Finally investors have realised the perfect storm of low interest rates and huge quantitative easing programs are coming to an end and possibly stockmarkets have got ahead of themselves particularly over the last year.

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However the fundamentals continue to look reasonable for the foreseeable future. The growth of the world economy is forecast to reach around 4% which hasn’t been achieved since 2011 and inflation although rising continues to remain at relatively low levels. Although interest rates appear to be on the rise they remain still at very low levels when compared to averages over the last thirty years.

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So what does this mean for investors? Given that the fundamentals remain strong it is certainly not a time to be anticipating long term market falls. However the unbridled optimism of 2017 needs to be replaced with an expectation of lower but consistent returns for stockmarkets with further corrections should markets get too far ahead of itself in the future. Our portfolios continue to provide long term capital growth for our clients with some having achieved double digit annualised returns over an extended period. The motto continues to be “time in the market” rather than “timing the market”

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-Alistair Murdoch