In US dollar terms, global equity markets enjoyed yet another good week – although translated into sterling things looked slightly weaker. The major US indices saw more record highs and, in Japan, both the TOPIX and the Nikkei moved sharply higher. Expectations of volatility, reflected in the VIX Index, remain low and that niggling feeling that things might be a bit too complacent is not going away.
Clearly, for UK investors the focus is on the forthcoming General Election although campaigning has rightly been pushed into the background by recent horrific events. With days to go now, the usual questions of what will happen to which assets under a variety of scenarios are being asked. As is also usually the case, these are of limited value and things are unlikely to change radically whatever the outcome. The one area that is expected see a reaction is the Pound sterling. But, again, will it react the way the pundits claim? Quite possibly not…
Amid all of this the temptation to sit on your hands and do nothing is very strong. But it is not the right thing to do and we are continuing our programme of adding to our emerging markets positions. This might seem at odds with our fears that things are too complacent – surely that implies there may be a pullback and a lower entry point? That is, of course, possible – but micro timing markets is foolhardy and we remain focussed on strong markets and longer term fundamentals rather than short term guesses.
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