“We have anticipated softening US-Iranian relations for around a year now, and we finally saw some breakthrough last month. US president Barack Obama inked a deal that ensures Iran will not develop nuclear weapons. In return, he orchestrated lifting the trade embargo that has crippled the Iranian economy.
A once major supplier of oil, Iran’s infrastructure and refineries were in a bad state even before a United Nations, European Union and US ban on accepting Iranian imports in January 2012. Now, they are in dire need of much refurbishment to boost exports back to the quantities of yesteryear. Regardless, news of the deal sent oil markets tumbling. That makes it even more likely that inflationary pressures will remain low; central bankers on both sides of the Atlantic will find interest rate hikes harder to justify in such an environment. We could see even greater monetary policy procrastination; indeed, bond yields have started to tighten – especially following the month-end – suggesting that is the case.
We expect further volatility, given the skittishness of most investors and the clutch of worries many see around the world. We are relatively confident about the global recovery, although we remain vigilant for short-term opportunities. As bond yields rise in periods of optimism, we intend to add to sovereign debt. During bearish mood swings we will buy those assets we believe will do well over a five-year view: quality equities.”
David Coombs, Head of Multi-Manager Investments, Rathbones