Our Investment Update

Towards the end of January this year, we had warned that there were “warnings” in equity markets and that investors should “hold tight.” We expected a correction but not quite so immediately.  We had also expected it to be something in the region of 5% to 10%.  In reality, it turned out to be a bit more and a very nasty time to be holding equities.  As we commented last week, things have been rather better more recently and most equity markets have picked up and are close to where they were at the beginning of the year.  We say most, because there are some exceptions and, unfortunately, two of those are areas where we are overweight – emerging markets and Japan.

Both emerging market and Japanese equities have struggled to recover from their losses. For the time being, we intend to retain our overweight stance in both asset classes.  Emerging markets are suffering from headwinds including the US dollar, worries over trade wars and the Chinese economy.  However, we still feel that they offer better value than many developed markets and that many of these worries are already priced in.  In the case of Japan, we do acknowledge that the recent period of solid growth may falter.  Economists are blaming this on many things ranging from weaker demand for exports to poor private consumption.  Whatever the reason is, it does mark the end of a robust period.  The question is whether it is a blip or something more sustained?  The consensus is that it is the former and we are happy to accept that, for now.

So we move into summer in rather better shape than we moved into spring. There are, undoubtedly, worries out there.  Nobody is going to pretend that the arguments between Iran and the US can be ignored – nor the tensions with Israel too.  As things stand, though, it is back to geo-politics as the biggest headwinds.  The tailwinds are solid – if unspectacular – economic news and good earnings seasons in both Europe and the US.  We have used the recovery to re-adjust our own positioning – including selling into strength in some areas so as to further reduce our exposure to riskier assets.  This simply reflects our view that, no matter how relaxed things are now, potential equity returns are likely to be lower in coming months.

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 (UK) and the Financial Services Board (South Africa). 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 more benign mood has settled over markets after the rocky start to the year. There seem to be three main reasons for this – first, the trend in economic data has been more reassuring, second the threat of a trade war has slipped down in the media and, third, the geo political background has calmed down.   Whatever the reasons are, though, it is a relief to have passed through such a volatile period.

With some of the ‘big picture’ worries fading, attention can turn to more practical matters and, for now, that means corporate earnings. Both in Europe and in the US, we are seeing the latest batch of earnings reports coming in.  In Europe, whilst there has been quite a dispersion in the results they have, on the whole, been seen as a positive by investors.   With the recent comments from the European Central Bank being interpreted positively, too, and robust purchasing managers’ indices, it was no surprise to see equity indices rise.

In the US, it was also a busy week for earnings. There, indices had a tougher time and slipped back.  The industrials sector showed it has had a tough time and Caterpillar shares took a big hit.  However, this time last year we had been wary about earnings so it has been reassuring to see that, on the whole, they expanded (according to FactSet) by some 23% against last year.  The question we would pose is simply this – is this as good as it gets?  Are we at peak earnings and, if so, where does the US equity market go from here?

How long this period of calm will last is anyone’s guess. Hopefully rather longer than the brief British spring sunshine at least.  Our suspicion is that investor sentiment is rather more fragile than it may appear.  That would suggest that if there is any bad news we may see further sharp wobbles.  But this is old news and something we have expected for some time.  For the time being, we welcome a return to more stable times.  Long may they last.

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 (UK) and the Financial Services Board (South Africa). 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

If the prospect of a trade war wasn’t bad enough, we then got missiles flying around the Middle East. Nobody expected spring to be a bed of primroses but investors have had to face a few challenges recently.  With typical perversity, of course, most equity markets ended the week higher despite all of the noise.

The underlying tone seems to reflect a recognition that, yes, volatility is back but, despite the nasty slides in equity prices earlier this year, the global economy is still ticking along okay and equity valuations are now cheaper in most cases. A lot cheaper in some cases.  And a case in point is Russia.  The rows and sanctions have seen both the ruble and share prices take big hits.  We have a small position in Russian equities and are very aware this has suffered in recent days.  We are keeping a close eye on things but do acknowledge it may be a while before things settle down.

Our expectations for the short term remain unchanged. Equities are still a better place to be than bonds.  But equity volatility is back.  With a vengeance.  In a mature economic cycle – or even a late cycle in some cases, such as the US – it is well worth weighing up how much you stand to make against how much you stand to lose.  It is a particularly difficult choice for new money – do you enter the market now or stay in cash and get practically no return?  It all hinges on how much risk you can take.  And how much you can afford to lose.  Because, just as we expect more good days, we also know there will be some bad ones.

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 (UK) and the Financial Services Board (South Africa). 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

As the news remains dominated by the possibility of a trade war, investors have remained nervous and equity markets unsettled. The perception that tensions are easing saw markets rise, renewed fears over an escalation saw pull backs.  For now, there is little to suggest that this pattern will change in the short term.  Volatility is, quite clearly, back.

Last week, we briefly discussed the refrain of the optimists that “all is good while the economy remains strong”. Increasingly, we are reading arguments that economic strength will translate into earnings growth that will make those markets that currently look expensive more reasonably valued.  The pull back seen this is year is largely regarded as a correction and highlighted as being only one of many seen during this bull market.  Even those who do believe that we are late in the cycle are arguing that equity markets tend to do well in the last year or so of a bull market and so we should hang on in there for the final ‘blow off’.

Well, we don’t want to be bolshie, but this does sound a little too much like conformation bias to us. We have been very clear that we don’t expect markets to come tumbling down around our ears in the immediate future.  However, we do think that we are nearer the end of the bull market than the beginning.  Will we see equities move higher from here?  We think so, yes.  Will they move higher then their peaks in January?  It would be nice to think so.  But the truth is that it would be a guess to say by how much and when.

What we do expect is that returns will be relatively low from equities, whilst volatility is likely to remain higher. It is for these reasons, therefore, that we are continuing our slightly more cautious posture.  We are progressively rebalancing towards a more neutral position and are using good days to top slice significant overweights.  The proceeds of these moves are expected to be redeployed into lower risk assets.  The result will be an overall de-risking of portfolios in the short term.

 

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 (UK) and the Financial Services Board (South Africa). 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 and European equities move higher, whilst US equities had another tough week. In fact, it was so tough that Bloomberg reported it as the worst start to April since 1929.  Thank goodness past performance is not necessarily a guide to future performance.  What is apparent, though, is that the Goldilocks period has passed and we are now in a later cycle phase where markets are likely to be buffeted by any bad news.

The other thing that stands out is the constant refrain that “the economic background remains strong.” It is a mellifluous line we have used ourselves.  But it does now seem to be being used as the rock for investors to cling to as other news flows around them.  Now we are not suggesting that the economic background is weak but we do think investors should consider what might happen if or when that perception of economic strength shifts.  Amid rich valuations we would expect to see sentiment shift quite quickly.

Given this background, we are becoming a little more cautious. We intend to use periods of strength to reduce our overweight equity positions to a more neutral stance.  This is emphatically not a reflection of any great panic and we are not exiting the equity markets.  It is, however, a reflection of our responsibility to our clients to protect their wealth as well as to grow it.  It also, perhaps, marks the beginning of a journey towards lower equity exposure in the months to come.

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 (UK) and the Financial Services Board (South Africa). 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

So far, 2018 has been a tough time for investors. And particularly tough for UK investors who have large exposure to UK equities which have been amongst the worst performing. The big question is obvious – where do things go from here? If only there was a simple answer. But, sadly, there isn’t.

What a lovely trade war

Let’s look at the overall background first. With a few exceptions, most economists are telling us that the global economy is solid and that it is still growing. That’s great and reassuring. But there are other factors at play. The big noise at the moment is about whether we see a global trade war or the US can strike a deal with China. It is all over the news so we won’t bore you with the details. In a nutshell, the possibility of US tariffs on some USD50 billion of imports from China from the beginning of May raised the prospect of retaliation. Equity markets had a torrid time, seeing sharp falls in every region.

What is lurking in the background

Lurking in the background are, of course, tightening US monetary policy, worries of the rate at which it will tighten if inflation picks up, and concerns for equity valuations. It’s not just US policy that is going to tighten either. The UK will and the Euro area will move in that direction too. Chuck into the mix stories about “it’s been such a long bull market”, the reality that we are later on in the cycle and a few items of weaker than expected macro data and it’s been a good mix to rattle investors’ confidence. Headlines about poisonings and diplomatic expulsions don’t help – even if they have very little real economic impact. At least the stories about North Korea and nuclear missiles have morphed into “let’s all be mates” – for now at least.

Prudence not real nervousness

None of the above, though, answers the question. Where do things go from here? Well, we think they should get better. A bit better at least. An equity pull back was expected and didn’t surprise us. But it may now have gone too far as these things so often do. We do still see global growth continuing, and we still don’t think this is the beginning of the next bear market. But we do expect lower returns and higher risks – for equity and for bond investors. So we will be looking at our portfolios where we have had overweights in equities and use any rally as an opportunity to rebalance with a view to adopting a more neutral stance. We regard this as prudent and not as a signal of any real nervousness.

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 (UK) and the Financial Services Board (South Africa). 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

Well, as expected, that was another jittery week. Most equity markets closed lower with the UK’s FTSE 100 actually being one to have fallen the least.  Perhaps because it has already had a pretty grim year to date?  The causes this time were pretty clear.  Amid thin volumes, a combination of uninspiring economic news was matched with worries about a global trade war and, in Europe at least, the outcome of the Italian Election.

We see the recent disappointing economic news as a short term issue. We still believe that global growth is solid and would point to global manufacturing PMIs as evidence of this.  We have, of course, noted previously that we are late in the economic cycle and so recognise that growth momentum is less likely to accelerate from here and more likely to decelerate.  But that does not signal an imminent recession.

Worries about a trade war are well founded. Protectionism is rarely a good thing and the impact on global trade has rightly alarmed many.  There is clearly more to come on this and the threats made by the European commission president, Jean-Claude Juncker, are likely to cause consternation to those who like to drink bourbon while riding a motorcycle and wearing jeans.

As for the Italian Election, this is not the first time they have had a situation like this. Inevitably, the suggestion that somehow right wing politicians might gain control of a major European economy gets sections of the media hot under the collar.  We prefer to wait and see how it plays out before getting too alarmed, and the biggest areas at risk are likely to be the lira and Italian bond yields.  Neither of which, unsurprisingly, are positions we hold.

As we have said before, we think it is going to continue to be a bit choppy in the near term. Hold on tight, do not panic, and watch for opportunities thrown up by markets overreacting remains our view.

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 (UK) and the Financial Services Board (South Africa). 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

What a nightmare – markets all fell sharply and everyone panicked about volatility because it was supposed to be low and the billboards screamed “Trillions wiped off share prices”. Thankfully, we all woke up this week to find markets pretty much back where they were and volatility back down to nearer where it should be.  Except, of course, it wasn’t a bad dream.  It happened and let’s hope it has brought a healthy dose of reality to markets.

In the same way that the pull back came as no surprise to us, nor did the scale and speed of the rebound. This is precisely why we had warned that this correction was coming, and why we had warned against jumping out of the market and then trying to jump in again at the bottom.  Those that rode through it had some decidedly anxious moments but have come through largely unscathed.

So what does the future hold for us? We think it would be naïve to assume all of our troubles are behind us.  There was undoubtedly a degree of complacency amongst some before the fall so let’s not fall into that trap.  Our optimistic view of the medium term outlook for equities remains unchanged.  However, our expectation that returns are likely to be lower than in recent years is also unchanged.  As is our view that the risk of sharp moves in either direction remain on the table.

So lower expected returns and higher prospective risks. That is the reality of equity investment at this stage of the cycle.  It calls for an ‘eyes-wide-open’ approach.  Understand what you are doing and why.  And, above all else, do not take on more risk than you are comfortable with.

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 (UK) and the Financial Services Board (South Africa). 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 we finally got the correction we had been expecting. But, judging from some of the wailing and gnashing of teeth in the media, there were still some to whom it came as a surprise that markets can go down as well as up.

We have written at length in recent weeks about the reasons for being wary and these were, pretty much, the triggers for the recent turmoil. Growing inflationary pressures in the US led to fears of higher prices and the risk of the Federal Reserve raising interest rates faster than expected.  With equity valuations high and volatility not only low, but many investors actually betting it would go lower, the warning signs really were there.

Anyway, that is now in the past. What matters is where do things go from here?  Well, we expect the short term to remain bumpy – possibly very bumpy.  The definition of a correction is 10% off from the recent high and of a bear market, 20% off from the year high.  So, whilst we are not in bear market territory, we need to recognise for every short term bounce there could be an equal and opposite slide back.  Could we see lows of 15%?  Quite possibly so, if we do, what should we do?

We stand by our view that the next bear market will be triggered by an expectation of the end of the business cycle. We may now be late cycle, and the end may now be sooner than many had expected, but we don’t think it is imminent.  So, with the global economy broadly strong, and many companies delivering robust earnings, we think this is a buying opportunity.

These periods of correction and uncertainty are not pleasant but they should not be seen as unusual. What was unusual was that it took so long to happen.  We have an opportunity to buy equities cheaper than they were before.  But be prudent.  Buy good companies with solid balance sheets and generating decent cash flow.  Remember, this is late cycle so protecting wealth matters.  Don’t squeeze the pips out with what is left of the juice.

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 (UK) and the Financial Services Board (South Africa). 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 biggest sell off for global stocks in two years,” according to Bloomberg. Some of the other headlines included, “Stocks May Tumble 10%” and “European Stocks Slide for 6th Day as Selloff Catches Up to US”.   Yes, the comfortable bubble of complacency got poked with the sharp pin of surging bond yields.  All of a sudden, sentiment seems to have turned.  Reading some of the comments over the last few days, equity investors are, apparently, “in for a further stomach-churning down-draft.”  So how worried should we be?

Let’s be quite clear – we don’t think this is the beginning of a bear market yet. There is still plenty of good news out there.  The global economic backdrop remains solid for now.  The geo-political stresses of recent years have moved more into the background.  And the current results season is showing that companies are delivering good results to their investors.  So where we are invested, we plan on staying invested.  We have no intention of trying to micro time a pull back in equity process when our medium term view remains positive.

That still hasn’t answered the question, though. In fact, it rather smacks of the same complacency we mentioned earlier.  Are we simply ignoring things?  Absolutely not.  In fact, we have warned that a correction was likely for some time and, as recently as last week, said we felt uncomfortable and that investors should hold tight.  Whether this is a full blown correction or not, frankly who knows.  If it is, a pull back of five to 10% is still not enough to make us want to risk a whippet-quick exit nor to attempt to jump back in whenever we think things might have bottomed.

In the immediate future, sentiment may become a self fulfilling prophesy. Bad news may lead to fewer buyers and more sellers and see prices fall further from here.  If they do, where we have cash to deploy we will be looking for buying opportunities.  It may be a bit too soon right now so perhaps not quite yet.  But we do not plan on trying to be too clever.  Nor do we plan on being too worried.  Focussed, yes.  Cautious, yes.  But worried? Not yet.

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