Fresh fear lurking for global financial markets
16 April 2018 London
Image: Shutterstock
Fresh fear is lurking in the global financial markets, according to Tom Elliott, international investment strategist at deVere Group.
Elliott, whose comments come amid increased market volatility in recent weeks, said that the fear is not solely related to concerns of an impending trade war between the US and other major economies, but rather that the global gross domestic product may have peaked in its current growth spurt.
He also noted three key factors that are adding to investors鈥� nervousness, including the potential trade war, the apprehension that a new wave of regulation will impact business models of some of the US鈥檚 largest quoted companies, and growing tensions between the US, UK, France and Russia following last week鈥檚 attack on Syrian chemical weapons installations.
However, Elliot explained that fundamentals remain supportive for stocks. Consensus estimates for global corporate earnings growth in the first quarter are at 15 per cent over the previous year, while for the Standard & Poor's 500 index it is 17 per cent.
He said: 鈥淭he beleaguered US tech sector is expected to see 22 per cent earnings growth, which will help sooth investors鈥� nerves. Despite the prospect of two, maybe three, more rate hikes from the Federal Reserve this year, and probably one from the Bank of England in May, monetary policy remains loose by historic standards in all the main economies.鈥�
鈥淭his supports risk assets, by keeping borrowing costs low for companies and their customers, and by keeping 鈥榬isk free鈥� rates low and unattractive relative to the expected returns from stocks.鈥�
Elliott concluded: 鈥淒espite new geopolitical concerns, our investment positioning remains unaltered.鈥�
鈥淲e favour a long-term, multi-asset approach to investing, whereby investors choose a suitable combination of global equities and bonds鈥攄epending on their risk profile and investment horizon鈥攁nd leave the portfolio unchanged. Too frequent rebalancing ensures winners are sold and losers are bought鈥攚hich financial history, and common sense, supports.鈥�
Elliott, whose comments come amid increased market volatility in recent weeks, said that the fear is not solely related to concerns of an impending trade war between the US and other major economies, but rather that the global gross domestic product may have peaked in its current growth spurt.
He also noted three key factors that are adding to investors鈥� nervousness, including the potential trade war, the apprehension that a new wave of regulation will impact business models of some of the US鈥檚 largest quoted companies, and growing tensions between the US, UK, France and Russia following last week鈥檚 attack on Syrian chemical weapons installations.
However, Elliot explained that fundamentals remain supportive for stocks. Consensus estimates for global corporate earnings growth in the first quarter are at 15 per cent over the previous year, while for the Standard & Poor's 500 index it is 17 per cent.
He said: 鈥淭he beleaguered US tech sector is expected to see 22 per cent earnings growth, which will help sooth investors鈥� nerves. Despite the prospect of two, maybe three, more rate hikes from the Federal Reserve this year, and probably one from the Bank of England in May, monetary policy remains loose by historic standards in all the main economies.鈥�
鈥淭his supports risk assets, by keeping borrowing costs low for companies and their customers, and by keeping 鈥榬isk free鈥� rates low and unattractive relative to the expected returns from stocks.鈥�
Elliott concluded: 鈥淒espite new geopolitical concerns, our investment positioning remains unaltered.鈥�
鈥淲e favour a long-term, multi-asset approach to investing, whereby investors choose a suitable combination of global equities and bonds鈥攄epending on their risk profile and investment horizon鈥攁nd leave the portfolio unchanged. Too frequent rebalancing ensures winners are sold and losers are bought鈥攚hich financial history, and common sense, supports.鈥�
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