We have had a busy few months at Carrington and made quite significant structural changes to portfolios and feel very happy about how we are positioned.
If we compared valuations at April 2013 and end of August it would be tempting to think not much had happened in the period. Nothing could be further from the truth.
Markets sold off after some guidance from the Chairman of the Fed in the US. He indicated that the support given to the markets via Quantitative Easing will be tapered off in the autumn. This wouldn’t be entirely negative as it should be a positive that markets need less support now.
Subsequently the markets were given further guidance and this helped calm things down.
FTSE 100 Daily Chart
You will see the decline in the FTSE 100 was in excess of 10% .We had anticipated there could be some weakness in the Summer months and this lead us to up our cash weightings before this decline.
We have also had much clearer guidance from the Bank of England’s new governor on the path and outlook for interest rates. He indicated he does not expect interest rates to rise until 2015 at the earliest and so the returns on cash will continue to be low.
The developed markets are now moving higher and we expect them to set up for a higher close by the year end.
The USA is seeing some signs of subdued growth but generally growth is very scarce.
In the last few months we have sold out of emerging markets and reduced our Pacific exposure.
We have reinstated a holding in the USA and for the first time we have added a new position in the Japanese market where a change of government has led to a major change in economic policy there.
We remain concerned over Europe and although we review this decision regularly, we think the risks arising from the Euro mean we do not want to invest there just yet.
Looking forward from here we are concerned that fixed interest markets are not as liquid as equity markets and over the next few weeks we will be looking to reduce our holdings. We will be in touch soon regarding this.
This year has marked similarities to previous years where the first and last quarters have provided good returns and we anticipate this year will be similar. We are positioned now for a year-end move higher in stock markets. We should mention it’s not uncommon for volatility to increase significantly in October and November and we may see some short periods where markets give back some of the recent gains. This hasn’t altered our view that they will close higher around the end of the year.
If you have any questions or would like to discuss anything then please get in touch. We look forward to hearing from you.