Volatility continues to stalk markets
“Despite these market wobbles, we don’t believe the world is on the verge of recession. However, we are not convinced that all is well either. Europe is fragile, the UK is grinding itself to a halt ahead of the Brexit referendum and the US is trying to normalise interest rates without strangling its own, or indeed the global, recovery. These are testing times.
We have been using sell-offs to add to the assets we like. The US will drive the global recovery, we believe, so we are focused on the US consumer. If economic data shows a deterioration in the American Main Street, we will review our position.
Apart from that, our central investment strategy remains unchanged. We expected volatility this year and have been vocal about this for months. Unfortunately, sharp drops in asset prices jar the nerves far more than vague but insistent warnings of choppy waters ahead. Stubbornly low oil prices have rattled investors; however, while there are negative consequences of this, we feel these are more than outweighed by the positive boost to Western economies and, more specifically, to the consumer.
We are keeping careful watch over macroeconomic indicators. A reversal of rapid employment growth in the US or a marked deterioration in services PMI surveys could likely change our positive view.”
David Coombs, Head of Multi Asset Investments, Rathbones