Our Investment Update

Global equity markets reacted positively to the comments from the US Federal Reserve that accompanied its latest increase in interest rates with the FTSE All-World Index closing 1.41% higher.  Whilst making it clear that the US will normalize rates as soon as possible, these comments were interpreted as more dovish and that further increases will be gradual.  As we have noted before, it is the pace of subsequent increases that matters more than this most recent move.

Both the Bank of Japan and the Bank of England left rates unchanged.  However, the interpretation placed upon the latter is of a more hawkish stance, and markets will need to adapt to higher rates sooner than has, perhaps, been expected.  Tomorrow’s inflation numbers will, therefore, be watched closely.  This environment still leaves bonds looking expensive.  As a result, we are maintaining our preference for high quality and short duration exposure and avoiding longer dated bonds.

It has been hard to escape the political noise in recent days.  The much debated Dutch elections had, unsurprisingly, a minimal impact upon markets.  The talk is now focussed on the forthcoming French elections and on when the UK Government will trigger Article 50.  Will these have more of an impact on markets?  As with all political speculation it is hard to say.  It would need a French government with a clear mandate to leave the euro to really rattle things.  As for the UK, everybody knows that Article 50 will be invoked so it would hardly be a clandestine move.  Sterling remains, in our view, most likely to see any impact and equity markets should be largely untouched.

We are still looking towards the future with expectations of solid global economic growth and an encouraging environment for equity markets.  However, despite the current more benign mood amongst investors, we still feel that the risk of a short term pull back remains.  As a result, we are retaining our slightly more defensive posture.  We remain overweight in equities and have been participating in recent upward moves but we do still have a small cash position which is earmarked for reinvestment when a suitable opportunity presents itself.

Regulatory Notice

European Wealth is a trading style of European Investment Management Limited (registered number 06931664) which is incorporated and registered in England and Wales with registered office at Ellenborough House, Wellington Street, Cheltenham, Gloucestershire GL50 1YD and authorised and regulated by the Financial Conduct Authority.  This message contains information that is confidential and privileged and it must not be distributed to any third party either whole or in part. If you are not the intended recipient, please advise the sender immediately and delete this message. This message is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice, nor should it be used as the basis for any investment decision. The information contained in this message has been prepared using all reasonable care. However, it is not guaranteed as to its accuracy, and it is published solely for information purposes. Our opinions are subject to change without notice and we are not under any obligation to update or keep this information current.

Risk Warnings

The investments discussed in this message may not be suitable for all investors. European Wealth does not guarantee the performance of any investments. Past performance is not necessarily a guide to future performance. The value of investments may go up or down and you may not get back the amount you have invested. The income from an investment is not fixed and may fluctuate. The value of an investment involving exposure to foreign currencies can be affected by exchange rate movements which may cause the value of the investment to go up or down. European Wealth and/or its affiliated companies and/or their employees may, from time to time, hold shares or holdings in the securities discussed in this message and may as agent buy or sell those securities.

Restricted Investors

This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof.

Our Investment Perspective

We have been broadly optimistic over the outlook for equity markets this year, and have seen them move higher across the board – in some cases very strongly.  At the same time, we have been emphasizing the need to understand that there are risks and that there may well be periods of uncertainty or worse.  Some of the triggers for nervousness are now approaching – the next rise in US interest rates, elections in Europe and, of course, the UK starting the process of leaving Europe.

On the up

There seems to be a clear consensus that US interest rates will go up this month.  It is not exactly a shock to us and has been widely discussed for a long time.  The likelihood of a tantrum, or even a hissy fit, in markets seems pretty unlikely.  We still feel that the rise reflects confidence in the US economy and that it should, therefore, be seen as a good thing.  The real key, of course, lies in the rate at which subsequent moves are made.  Too far and too fast would be a very real threat and something investors should rightly be nervous of.  However, we expect things to be handled much more prudently and remain optimistic.

What do you do about Europe?

On the one hand, Europe looks like a political basket case.  On the other, there seems to be some real traction in terms of economic recovery as deflation retreats and sentiment picks up.  Which will be the winner in this conundrum?  Given some of the recent strength in equity markets, the short term looks as if the winner will be the worries over the politics.  Whether it is Dutch or French elections, Turkish threats or debt worries, there seems to be a taxi rank of anxious moments forming.  However, if the underlying economic picture continues to improve, then the medium term outlook could be much brighter.  It may not be time to jump in yet, but we will be watching developments closely.

Pulling the trigger

The political wrangling and accompanying media speculation about the UK leaving the European Union seems to go on and on.  Sadly, it is not going to stop any time soon either.  However, we do seem to be approaching the end of the beginning which will be marked by the triggering of Article 50.  Of course that simply marks what may well be years of more posturing and squabbling.  Such European negotiations have something of a game of Mornington Crescent about them – they appear improvised, incomprehensible and lacking rules.  The big difference is, of course, that, they are not funny.  Well, not often anyway.

As investors, we need to look through this noise and assess what will be the likely impact on UK assets.  At this stage, we see most of the ‘action’ being likely to be seen in the currency in the short term.  The pound has already fallen considerably.  Inevitably, depending on the political viewpoint, this has been seen as either a calamity for the economy or the best thing for UK exporters in years.  Some of these arguments feel rather speculative to us.  Looking towards the medium term we feel the pound may well be over sold – and this is why we have recently ‘repatriated’ some of our US dollar linked positions.  We still like UK equities – despite our recent profit taking – and, as in Europe, continue to view any forthcoming weakness as more of an opportunity than a threat.

Stay focused

Yet again, we find short term worries looming large over a generally sound economic backdrop.  We have been more defensively positioned in expectation of these concerns, but have also made sure that we participated in the upward moves too.  The coming weeks may well be challenging.  They will certainly be tedious in terms of more noise.

Regulatory Notice

European Wealth is a trading style of European Investment Management Limited (registered number 06931664) which is incorporated and registered in England and Wales with registered office at Ellenborough House, Wellington Street, Cheltenham, Gloucestershire GL50 1YD and authorised and regulated by the Financial Conduct Authority.  This message contains information that is confidential and privileged and it must not be distributed to any third party either whole or in part. If you are not the intended recipient, please advise the sender immediately and delete this message. This message is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice, nor should it be used as the basis for any investment decision. The information contained in this message has been prepared using all reasonable care. However, it is not guaranteed as to its accuracy, and it is published solely for information purposes. Our opinions are subject to change without notice and we are not under any obligation to update or keep this information current.

Risk Warnings

The investments discussed in this message may not be suitable for all investors. European Wealth does not guarantee the performance of any investments. Past performance is not necessarily a guide to future performance. The value of investments may go up or down and you may not get back the amount you have invested. The income from an investment is not fixed and may fluctuate. The value of an investment involving exposure to foreign currencies can be affected by exchange rate movements which may cause the value of the investment to go up or down. European Wealth and/or its affiliated companies and/or their employees may, from time to time, hold shares or holdings in the securities discussed in this message and may as agent buy or sell those securities.

Restricted Investors

This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof.

Our Investment Update

Last week saw US equity markets continue to hit record highs.  It seems that the enthusiasm over the anticipated policies of President Trump continues.  His State of the Union address to Congress tomorrow may add some meat to the bones of speculation.  Let’s hope so, anyway, as it would make a change to move away from the seemingly incessant barrage of nastiness.  The positive note in the US was not matched in Europe, where most equity markets were subdued and closed the week lower.  No real surprise there, though, given the political events looming large on the horizon.

At the beginning of the year we adopted a slightly more cautious position, taking some profits and keeping the proceeds in cash.  At the time, we made it clear that this was a short term position and our medium and longer term views remained more positive.  Our concern then was that there are so many potential points of bad news that there could be some bumps.  Well, so far, these have not materialised.  In fact, many equity markets are slightly higher now than they were.  Did we get it wrong?

We still feel that there is too much short term complacency amongst investors.  In some ways it is easy to see why.  Doing nothing has its attractions.  After all, why take more risk when markets are expensive and the political background so challenging?  Equally, why go risk off when the economic data from almost all key markets is so positive?  It does seem so easy to do nothing in such circumstances.  Well, we do not have that luxury.  We have made our call and reduced our exposure to risk.  With new money coming in, we are also being very selective about putting it into the market at these levels.

In short, we do not see our position as something that we have got wrong.  Hindsight is a wonderful thing.  And timing markets is also notoriously difficult.  This is why we try to avoid short term noise and focus, instead, on longer term themes.  One of those themes, for us at least, is that risks are high at the very same time that most asset prices are high.  In our view, that combination does more than just suggest prudence – it positively screams it.  It is certainly not our job to risk our clients’ assets for the sake of a few percentage points of gain.

Regulatory Notice

European Wealth is a trading style of European Investment Management Limited (registered number 06931664) which is incorporated and registered in England and Wales with registered office at Ellenborough House, Wellington Street, Cheltenham, Gloucestershire GL50 1YD and authorised and regulated by the Financial Conduct Authority.  This message contains information that is confidential and privileged and it must not be distributed to any third party either whole or in part. If you are not the intended recipient, please advise the sender immediately and delete this message. This message is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice, nor should it be used as the basis for any investment decision. The information contained in this message has been prepared using all reasonable care. However, it is not guaranteed as to its accuracy, and it is published solely for information purposes. Our opinions are subject to change without notice and we are not under any obligation to update or keep this information current.

Risk Warnings

The investments discussed in this message may not be suitable for all investors. European Wealth does not guarantee the performance of any investments. Past performance is not necessarily a guide to future performance. The value of investments may go up or down and you may not get back the amount you have invested. The income from an investment is not fixed and may fluctuate. The value of an investment involving exposure to foreign currencies can be affected by exchange rate movements which may cause the value of the investment to go up or down. European Wealth and/or its affiliated companies and/or their employees may, from time to time, hold shares or holdings in the securities discussed in this message and may as agent buy or sell those securities.

Restricted Investors

This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof.

Our Investment Update

A rather mixed week saw UK equities move slightly higher, Japanese and European equities slightly lower, and the remainder fairly flat.  In fairness, this did not come as a surprise as investors continue to mull over the risks posed by the big political issues that still dominate the news.  In the absence of any significant policy clangers or unexpected economic news, this seems likely to continue in the short term.

In terms of the underlying economic picture, there was little news of real note.  Unsurprisingly, the Federal Reserve left interest rates unchanged.  It still seems likely that the US economy will pick up later in the year as the good consumer and business sentiment kicks in.  What that means for rates, though, is uncertain.  We saw the ‘will they, won’t they’ speculation over rate hikes last year and this year will probably be the same.  Guessing when and how many hikes there will be remains speculation – so we will leave that to others.

The political pontificating in Europe continues.  Whether it is over the UK leaving, the forthcoming elections in member states or even the stream of negativity about President Trump, there is a lot of talking going on.  Behind all that, there was actually some good news.  It looks as if the Euro area actually grew faster than the US in 2016.  Granted it looks as if it was 1.8% compared to 1.6% for the US but, nonetheless, it is good news.  Unemployment also improved and the higher oil price has led consumer prices higher, too.  Of course problems remain.  We discussed the re-emergence of concern over Greek debt last week.  With so many other issues in the headlines it seems not to have quite gained the coverage that it did previously.   If nothing is done about it, the International Monetary Fund’s dramatic warnings of a crisis may come true.

We are still positive about the longer term outlook for the global economy and, therefore, for equity markets.  And we must separate the shorter term worries and noise from the longer term fundamental picture.   There is nothing we can do to change the short term noise.  What we must do, though, is remain focussed and not get distracted by it.  If the noise triggers the occasional wobble, or even a sharp pull back, then we will still be looking for entry points.  All is not doom and gloom.

Regulatory Notice

European Wealth is a trading style of European Investment Management Limited (registered number 06931664) which is incorporated and registered in England and Wales with registered office at Ellenborough House, Wellington Street, Cheltenham, Gloucestershire GL50 1YD and authorised and regulated by the Financial Conduct Authority.  This message contains information that is confidential and privileged and it must not be distributed to any third party either whole or in part. If you are not the intended recipient, please advise the sender immediately and delete this message. This message is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice, nor should it be used as the basis for any investment decision. The information contained in this message has been prepared using all reasonable care. However, it is not guaranteed as to its accuracy, and it is published solely for information purposes. Our opinions are subject to change without notice and we are not under any obligation to update or keep this information current.

Risk Warnings

The investments discussed in this message may not be suitable for all investors. European Wealth does not guarantee the performance of any investments. Past performance is not necessarily a guide to future performance. The value of investments may go up or down and you may not get back the amount you have invested. The income from an investment is not fixed and may fluctuate. The value of an investment involving exposure to foreign currencies can be affected by exchange rate movements which may cause the value of the investment to go up or down. European Wealth and/or its affiliated companies and/or their employees may, from time to time, hold shares or holdings in the securities discussed in this message and may as agent buy or sell those securities.

Restricted Investors

This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof.

Our Investment Update

Wailing and gnashing of teeth

Once again, the news has been dominated by politics.  Even the business news has not escaped the wailing and gnashing of teeth over developments in the United States, with some 17 Presidential Actions announced.  In fairness, it made a change from the endless moaning about Britain leaving the European Union – with the latest economic growth numbers putting another nail in the coffin of Project Fear.

Record highs in the US

In any event, behind all of the noise, most equity markets had a good week.  Good, in fact, seems a bit lightweight to describe the S&P 500, Dow Jones and Nasdaq indices all hitting record highs.  Things were less strong here, with the FTSE 100 Index falling slightly further.  This was not unexpected and our concerns over valuations at these levels had already led us to significantly reduce our positions.  Interestingly, the FTSE 250 Index, where we have biased our UK equity exposure, had a stronger week and rose by 0.22%.

Greek debt worries

We have warned repeatedly that we expect some bumps along the way this year.  One that seems to be re-emerging is Greece.  It seems a long time since the Greek debt crisis dominated the news.  Well it is back.  To put it simply, those that have lent Greece money are worried that it cannot hit its financial targets before the latest bailout expires.  The Greek government is caught in the middle.  Further cuts and austerity may well see it fall.  But failing to satisfy the country’s creditors might be even worse.  With EUR 10.5 billion of debt to repay in the summer, time is not on their side.  No wonder the International Monetary Fund is using language like “disastrous” and “explosive”.  With everything else going on in Europe, can the Eurocrats afford this blowing up?

More defensive

Despite the record highs seen in the States, markets can hardly be described as effervescent.  Yes, there is plenty of positive news but we are still a little cautious.  We have adopted a more defensive stance and, for the time being, we are remaining that way.   Whilst we still retain our longer term view that global growth remains intact and that equity markets offer the best prospective returns, the shorter term outlook is murkier.  We fully expect to redeploy our cash positions but not just yet.  What would be the trigger for this?  Well, a sharp pull back would certainly be an entry point.   More clarity over geopolitics?  Well that, too, would be good.  But we will not be holding our breath.

Regulatory Notice

European Wealth is a trading style of European Investment Management Limited (registered number 06931664) which is incorporated and registered in England and Wales with registered office at Ellenborough House, Wellington Street, Cheltenham, Gloucestershire GL50 1YD and authorised and regulated by the Financial Conduct Authority.  This message contains information that is confidential and privileged and it must not be distributed to any third party either whole or in part. If you are not the intended recipient, please advise the sender immediately and delete this message. This message is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice, nor should it be used as the basis for any investment decision. The information contained in this message has been prepared using all reasonable care. However, it is not guaranteed as to its accuracy, and it is published solely for information purposes. Our opinions are subject to change without notice and we are not under any obligation to update or keep this information current.

Risk Warnings

The investments discussed in this message may not be suitable for all investors. European Wealth does not guarantee the performance of any investments. Past performance is not necessarily a guide to future performance. The value of investments may go up or down and you may not get back the amount you have invested. The income from an investment is not fixed and may fluctuate. The value of an investment involving exposure to foreign currencies can be affected by exchange rate movements which may cause the value of the investment to go up or down. European Wealth and/or its affiliated companies and/or their employees may, from time to time, hold shares or holdings in the securities discussed in this message and may as agent buy or sell those securities.

Restricted Investors

This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof.

Our Investment Update

Investors turned their attention to the inauguration of President Trump.  It was hard to miss it.  The outpouring of noise was seemingly endless – whether supportive or outraged.  Trying to put this to one side and look at what he actually said in his speech, we are left with limited detail on what to expect in terms of policy, taxes or the much hyped infrastructure spending.  The focus on “making America great again” came as no surprise – nor did the wailing about ‘isolationism’ and ‘protectionism’ from this side of the Atlantic.  It was this concern that saw the US dollar pull back slightly, with the pound hitting a five week high.  It was noticeable that the price of gold picked up, too, with the ‘safe haven’ hitting a two month high.

Many large UK exporters in the FTSE100 Index saw their share prices marked down, apparently on the back of the stronger pound.  In reality, most of these shares had seen a very strong run recently and we fully expected some sort of consolidation.  It was this run that led us to take out our FTSE 100 positions last week.  The proceeds of this are being retained in cash for now.  It allows us to adopt a more defensive posture in these somewhat uncertain times.  Whilst the US may be dominating the airwaves, we are focusing more on Europe, our relationship with it and its own relationship with itself.

Once again, we do want to be quite clear that being a little more defensive does not mean that we are expecting a meltdown.  We do not.  We still expect to see the global economy expand – albeit fairly modestly.  However, the enthusiastic run in global equities since last November leaves many looking pretty fully valued and we feel a lot of the ‘good’ news is already priced in.  So we need to get through the next few months and also see an augmentation to the evidence that the rhetoric being spouted around is becoming a reality.  We expect that this period could be bumpy but, as ever, if we see a sharp pull back it will be an opportunity to reinvest our cash positions.

Regulatory Notice

European Wealth is a trading style of European Investment Management Limited (registered number 06931664) which is incorporated and registered in England and Wales with registered office at Ellenborough House, Wellington Street, Cheltenham, Gloucestershire GL50 1YD and authorised and regulated by the Financial Conduct Authority.  This message contains information that is confidential and privileged and it must not be distributed to any third party either whole or in part. If you are not the intended recipient, please advise the sender immediately and delete this message. This message is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice, nor should it be used as the basis for any investment decision. The information contained in this message has been prepared using all reasonable care. However, it is not guaranteed as to its accuracy, and it is published solely for information purposes. Our opinions are subject to change without notice and we are not under any obligation to update or keep this information current.

Risk Warnings

The investments discussed in this message may not be suitable for all investors. European Wealth does not guarantee the performance of any investments. Past performance is not necessarily a guide to future performance. The value of investments may go up or down and you may not get back the amount you have invested. The income from an investment is not fixed and may fluctuate. The value of an investment involving exposure to foreign currencies can be affected by exchange rate movements which may cause the value of the investment to go up or down. European Wealth and/or its affiliated companies and/or their employees may, from time to time, hold shares or holdings in the securities discussed in this message and may as agent buy or sell those securities.

Restricted Investors

This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof.

Our Investment Perspective

The pedestrian pace of global economic growth finally picked up in the latter half of last year and this is expected to be maintained as we move into 2017.  Equity markets have reacted positively to this and expectations of volatility have fallen – at least for now.  The problem facing investors, though, is how to weigh up the prospects of better growth on the one hand with the very real political and interest rate risks on the other.  This is a real dilemma.  And one that we think many investors are too sanguine about.

To fully understand where we are, it is worth looking back at how we got here.  We have had a jolly good run for five years or so.  There have certainly been some nasty times along the way – there always are.  But, largely speaking, it has been a period of excellent returns for both equity and bond investors.  On the basis that all good things come to an end, is the party now over?  We do not think it is for equity investors but we do think bumpy times lie ahead.  Bond investors, though, should leave the party now – and prepare themselves for a something of a hangover.

The story on bonds is one that we have been telling for some time.  Over priced and facing interest rate rises, the returns are simply not worth it.  Stay short dated and stay with quality remains the mantra.  Taking too much risk in bonds could lead to some serious capital losses.  The story on equities, though, is more complicated.

Within equity markets there are some that look cheap, some that look fairly valued, and some that look expensive.  So nothing new there then.  But which ones are which?  And are the cheap ones cheap for a reason?  Well, many of the developed markets look fully valued and the US pretty stretched.  If better growth translates into better corporate earnings then that is okay.  But please beware of companies that fail to deliver against their earnings expectations – they could take markets down sharply.

We are making some adjustments to our equity exposure.  We are reweighting our Asia Pacific and emerging markets positions with the intention of re-emphasising our Japanese exposure and moving overweight whilst reducing our exposure to China.  This reflects our thinking that the opportunities in Japanese equities has improved and our expectation of a weaker yen (especially against the US dollar), coupled with an improving economic background and more stimuli reinforces this.  As for China, we moved overweight deliberately last year because we expected a positive shock and this has largely paid off.  We are not China bears all of a sudden, but we do see better opportunities elsewhere for now.

One of the areas we like is Russia.  We have previously dipped our toes into this market but we anticipate making a more definite commitment here.  There are solid companies there that are trading on single digit price/earnings ratios and double digit yields.  Oil has stabilized, the economy is looking better and there is a real possibility of improved relations with the US leading to lifting of sanctions.  We accept that, as with all emerging markets, there is the possibility of increased volatility but we are of the view that this is a risk worth taking at this time.

So we are broadly optimistic still, but we continue to counsel our clients to ensure they understand the risks they face.  It would be too naive to expect the last five years risk adjusted returns to continue.  We are, perhaps, at a turning point.  The massive money printing programmes are probably reaching their peak this quarter.  The expectation is that new fiscal stimuli will take over and become the new drivers of the equity markets.  We shall see.

We mentioned the possible political issues too.  It does feel that Brexit is not fully ‘priced in’ at the moment.  When Article 50 is triggered, the real negotiations start.  But we all know the speed at which the European political cadre and its associated bureaucrats move so goodness knows how long it will all drag on.  With the French elections looming and plenty of other political shenanigans expected across Europe there will be a lot of noise and posturing.

Amid all of that noise, a clear head will be needed.  There is a growing sense of complacency at the moment and that always makes us feel uncomfortable.  We intend to continue our strategy of favouring equities, avoiding bonds, and keeping risk well controlled.  We will also not be shy of banking profits where suitable opportunities arise.

Regulatory Notice

European Wealth is a trading style of European Investment Management Limited (registered number 06931664), European Wealth Trading Limited which is a member of the London Stock Exchange (registered number 03109469), and European Financial Planning Limited (registered number 01265376), each incorporated and registered in England and Wales with registered office at Ellenborough House, Wellington Street, Cheltenham, Gloucestershire GL50 1YD and authorised and regulated by the Financial Conduct Authority.  European Wealth (Switzerland) SA is a member of the Swiss General Self Regulatory Organization PolyReg SA.  All these companies are wholly owned subsidiaries of European Wealth Group Limited (registered number 42316) which is incorporated in Guernsey with registered office at Mill Court, La Charroterie, St Peter Port, Guernsey GY1 3QZ.  This document contains information that is confidential and privileged and it must not be distributed to any third party either whole or in part.  If you are not the intended recipient, please advise the sender immediately and delete this document.  This document is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice, nor should it be used as the basis for any investment decision.  The information contained in this document has been prepared using all reasonable care.  However, it is not guaranteed as to its accuracy, and it is published solely for information purposes. Our opinions are subject to change without notice and we are not under any obligation to update or keep this information current.

Risk Warnings

The investments discussed in this document may not be suitable for all investors. European Wealth does not guarantee the performance of any investments.  Past performance is not necessarily a guide to future performance. The value of investments may go up or down and you may not get back the amount you have invested.  The income from an investment is not fixed and may fluctuate.  The value of an investment involving exposure to foreign currencies can be affected by exchange rate movements which may cause the value of the investment to go up or down.  European Wealth and/or its affiliated companies and/or their employees may, from time to time, hold shares or holdings in the securities discussed in this document and may as agent buy or sell those securities.

Restricted Investors

This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof.

Our Investment Update

Last week saw investors return after the holiday break with a remarkable degree of optimism.  This seemed to be justified by largely positive economic news.  Here, the purchasing managers’ index hit its highest level for five year.  Whilst data from the US was more mixed, European inflation picking up strongly was interpreted as good news.  The stronger international news saw the rally in the US dollar run out of steam, but equity markets were up on the week with Asian markets leading the pack.  So if things were so positive, why do we talk about a remarkable degree of optimism?

On a grey, cold and wet morning with the Tubes on strike and Dippy having left the Museum, it is easy to become disillusioned.  But that is not it.  We remain broadly positive for the coming year and still expect to see the best opportunities in risk assets such as equities.  So we are not disillusioned.  But we are a little wary.  We have never liked trying to make investment decisions based on politics.  The problem, though, is that politics are going to be a big feature of this year.  A very big feature.

Whether it is the UK, Europe or the US, big political events will dominate the thinking of investors.  Inevitably, the noise and speculation surrounding them can be over exaggerated and reactions to forthcoming events can be more extreme than might actually be warranted.  With equity markets having moved progressively higher most no longer look cheap.  This suggests that, as we have warned for some time, there may be some sharp corrections ahead.

As we said earlier, though, we are not pessimistic.  Change does not have to be bad.  Change can throw up opportunities.  And if we do see corrections then they may well provided good entry points at more attractive prices.  Those corrections we anticipate may well be followed by equally sharp recoveries.  It promises to be a challenging year but that is nothing new.

Regulatory Notice

European Wealth is a trading style of European Investment Management Limited (registered number 06931664) which is incorporated and registered in England and Wales with registered office at Ellenborough House, Wellington Street, Cheltenham, Gloucestershire GL50 1YD and authorised and regulated by the Financial Conduct Authority.  This message contains information that is confidential and privileged and it must not be distributed to any third party either whole or in part. If you are not the intended recipient, please advise the sender immediately and delete this message. This message is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice, nor should it be used as the basis for any investment decision. The information contained in this message has been prepared using all reasonable care. However, it is not guaranteed as to its accuracy, and it is published solely for information purposes. Our opinions are subject to change without notice and we are not under any obligation to update or keep this information current.

Risk Warnings

The investments discussed in this message may not be suitable for all investors. European Wealth does not guarantee the performance of any investments. Past performance is not necessarily a guide to future performance. The value of investments may go up or down and you may not get back the amount you have invested. The income from an investment is not fixed and may fluctuate. The value of an investment involving exposure to foreign currencies can be affected by exchange rate movements which may cause the value of the investment to go up or down. European Wealth and/or its affiliated companies and/or their employees may, from time to time, hold shares or holdings in the securities discussed in this message and may as agent buy or sell those securities.

Restricted Investors

This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof.

Our Investment Update

The big news last week was, of course, the rise in US interest rates.  Given how widely anticipated it had been, the reaction was understandably fairly muted.  Most of the major equity indices rose at first before sliding back.  Emerging markets fell back the most amid concern over the impact of a stronger US dollar.  10 year US Treasuries saw yields move over 2.5% and the US dollar hit its highest level against the euro since 2003.  Brent crude rose slightly, whilst gold continued to slip back.

So the Federal Open Market Committee announced a 0.25% rate rise.  That was no real surprise.  What was interesting, though, was the more positive tone on both inflation and economic growth.  The Committee may have said that policy would be “accommodative” but there is the suggestion of three rate rises next year rather than two.  Given how many people were wrong footed in the ‘guess the number of rate rises in 2016’ game we are wary of precise numbers.  There is a lot going on next year and much of it has the potential to change things – including rate rises.

At home, the Bank of England’s Monetary Policy Committee left rates as they are.  As with the US, this surprised pretty much nobody.  It also kept its quantitative easing programme the same.  But here, too, the interest lay in the detail where the Committee said that it expects inflation to breach its 2% target – but not by as much as previously expected.  Apparently this could make us feel richer – even though we may struggle to get anywhere amid the strikes, or even to get a Christmas card delivered.

As we approach the end of the year and the onset of the festive season, we have probably seen the last of the big economic news items for 2016 – unless the economic growth numbers later this week produce an unexpected shock.  For now, we expect most investors to digest last week’s news and focus on the forthcoming holidays.  2017 is looming large and will doubtless bring fresh challenges and opportunities.

Regulatory Notice

European Wealth is a trading style of European Investment Management Limited (registered number 06931664) which is incorporated and registered in England and Wales with registered office at Ellenborough House, Wellington Street, Cheltenham, Gloucestershire GL50 1YD and authorised and regulated by the Financial Conduct Authority.  This message contains information that is confidential and privileged and it must not be distributed to any third party either whole or in part. If you are not the intended recipient, please advise the sender immediately and delete this message. This message is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice, nor should it be used as the basis for any investment decision. The information contained in this message has been prepared using all reasonable care. However, it is not guaranteed as to its accuracy, and it is published solely for information purposes. Our opinions are subject to change without notice and we are not under any obligation to update or keep this information current.

Risk Warnings

The investments discussed in this message may not be suitable for all investors. European Wealth does not guarantee the performance of any investments. Past performance is not necessarily a guide to future performance. The value of investments may go up or down and you may not get back the amount you have invested. The income from an investment is not fixed and may fluctuate. The value of an investment involving exposure to foreign currencies can be affected by exchange rate movements which may cause the value of the investment to go up or down. European Wealth and/or its affiliated companies and/or their employees may, from time to time, hold shares or holdings in the securities discussed in this message and may as agent buy or sell those securities.

Restricted Investors

This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof.

Our Investment Update

So, a strong performance from equity markets last week as investors’ appetite for risk assets improved.  Overall, the FTSE All-World Index rose by  2.83%, with European markets posting some of the strongest gains following European Central Bank President Draghi’s comments on ‘trimming’ the asset purchase programme.  It’s not tapering.  Honest.  Unsurprisingly, European bond yields rose on this news.  And US 10 year Treasury yields rose slightly in expectation of a 0.25% rise in interest rates by the Federal Reserve.  Oil was flat and gold continued its slide, falling by 1.26% to take the three month fall to 12.52%.  Volatility also fell and remains at historically low levels.

It is hard to tell whether the more optimistic tone reflects a genuine sense of confidence in the markets or whether it is a sign of a more relaxed frame of mind as Christmas approaches.  We accept that a rise in US interest rates is pretty much priced in and so is unlikely to cause a major upset.  In the short term, there would seem to be few other obvious triggers for a reversal in sentiment.  We do not like feeling complacent.

Looking into next year, of course, there is any number of speedbumps.  The debate on Britain and Europe rumbles on with some Conservative backbenchers becoming increasingly truculent – no change there then.  This will, inevitably, dominate the domestic thinking.  But there are plenty of other political challenges out there and on top of those is the whole reflation debate.  So complacency remains an unwise stance.  We are still a little wary of the possibility of short term moves.  Last week it was up which was good.  But it could so easily be the same move downwards.  As result, we urge prudence in the short term whilst remaining optimistic over the course of the year.

Regulatory Notice

European Wealth is a trading style of European Investment Management Limited (registered number 06931664) which is incorporated and registered in England and Wales with registered office at Ellenborough House, Wellington Street, Cheltenham, Gloucestershire GL50 1YD and authorised and regulated by the Financial Conduct Authority.  This message contains information that is confidential and privileged and it must not be distributed to any third party either whole or in part. If you are not the intended recipient, please advise the sender immediately and delete this message. This message is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice, nor should it be used as the basis for any investment decision. The information contained in this message has been prepared using all reasonable care. However, it is not guaranteed as to its accuracy, and it is published solely for information purposes. Our opinions are subject to change without notice and we are not under any obligation to update or keep this information current.

Risk Warnings

The investments discussed in this message may not be suitable for all investors. European Wealth does not guarantee the performance of any investments. Past performance is not necessarily a guide to future performance. The value of investments may go up or down and you may not get back the amount you have invested. The income from an investment is not fixed and may fluctuate. The value of an investment involving exposure to foreign currencies can be affected by exchange rate movements which may cause the value of the investment to go up or down. European Wealth and/or its affiliated companies and/or their employees may, from time to time, hold shares or holdings in the securities discussed in this message and may as agent buy or sell those securities.

Restricted Investors

This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof.