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| Market Data - 5:30PM UK | |||
|---|---|---|---|
| FTSE 100 | 5267.62 | -70.76 | -1.33% |
| FTSE 250 | 10431.90 | -161.04 | -1.52% |
| Dax 30 | 6271.22 | -37.74 | -0.6% |
| Nasdaq | 2778.79 | -34.90 | -1.24% |
| EuroStoxx 50 | 2144.69 | -2.22 | -0.1% |
| Data delayed by at least 15 minutes | |||
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Castle Court Consulting
3 Park Court Mews
Park Place
Cardiff
CF10 3DQ
Email: info@castlecourt.biz
Tel: 029 2034 8630
Fax: 029 2034 5276
New Year Investment View
Investment Views - January 2012
2011 was a difficult year for investors. The first half saw some modest gains in some asset classes whereas the second half was characterized by extreme volatility in the summer / autumn resulting in virtually all markets posting losses for the 2011 calendar year.
The euro debt situation is likely to continue to be a dominating and recurring theme during the coming months – there is no quick fix and political issues will ‘interfere’ with the ability for a cohesive economic solution to be agreed upon and implemented.
In the US we have a Presidential election to contend with. At the moment it seems likely that Obama will get re-elected purely on the basis of the lack of a strong candidate from the Republican Party; this can of course all change very quickly! Traditionally, election years have seen incumbent first term Presidents endeavour to create short term economic impacts in order to achieve re-election. 2012 may well be different. Firstly because of the lack of a credible alternative to Obama and secondly due to the lack of funds in which to provide any short term economic stimulus.
So, where do we see opportunity in 2012?
Volatility in main equity markets will continue making short term investment decisions difficult. However, longer term strategies should ‘ignore’ much of this volatility which irons itself out over the medium to long term.
We see merit in UK equity income investments as well as continuing to recommend Far East equity markets. A drip feed investment approach continues to be our approach rather than placing funds into the market all in one go. US and European equity markets will continue, we believe, to be difficult for investors and we are avoiding these areas.
Mature economy government debt (gilts etc) are also areas we are cautious of – not necessarily due to default risk but more because the yields are so low (and hence capital values high) that they do not offer good value for money. Corporate debt, on the other hand, can offer opportunity as capital values are much lower, reflecting a general nervousness about corporate failure rates which can be offset through the use of pooled funds rather than investing in individual holdings.
Economic data is likely to show weak growth in most Western countries whereas we do see growth in Far East / China regions. We also expect to see year on year inflation in the UK fall, particularly in the first half of 2012, although it will remain above the target level of 2% as measured by CPI.
Castle Court Consulting Strategy
For new money being added to portfolios our drip feed strategy for UK and Far East equities remains a sound one in order to 'iron out' some of the impact of market volatility on short term returns.
In addition, we have actively not reacted to short term market movements. Our experience of looking after client portfolios has shown us that reacting (or trying to react) to short term market volatility almost certainly leads to the creation of greater losses. It is more important to keep focused on the true underlying economic picture rather than the sometimes sensational headlines of the press.
Combining the drip feed strategy with a well thought out multi asset allocation strategy remains the cornerstone to our current investment views and this has broadly remained unchanged over the past 24 months, with only some relatively minor adjustments being made where necessary.
We do see opportunity for investors in the current markets and with cash now losing money in real terms it is important to ensure that your overall wealth is well managed and that over exposure to what might be seen as a safe haven (cash) does not prejudice your longer term wealth management objectives.
