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market news by nicholas ford
It’s easy to disregard the superstition surrounding the month of October and equity markets (the month has witnessed both the Wall Street Crash in the 20’s and 1987’s Black Monday). However sometimes fear like this becomes self fulfilling in a similar way to “key” levels in the stock market. Take 7000 for example, the FTSE 100 has never broken this level and it is seen as significant. In reality 7000 should be no more significant than 6900 for example, its merely an indexed value. It becomes significant because market commentators talk about it, watch it and act accordingly. Likewise with the month of October.
Superstition aside, the markets seemed to have settled down somewhat from the turmoil of September. And turmoil it was with central bank rates slashed in the US and Europe, a run on a UK bank, emergency loans, billons spent shoring up funds and banks, disappearing Hedge fund managers, disappearing Hedge funds, the list goes on. There is an uneasy calm and a façade of business as usual as everyone waits to see if the 2007 credit crunch will usher in recession in the US or indeed the UK. Consensus opinion appears to be 50/50 at the moment.
We are watching for confidence to return to the markets before recommending reallocating money to equities. Confidence has taken an almighty hit over the last couple of months and there is an awful lot of capital moving around between asset classes at the moment as institutions quietly unwind positions clients are no longer comfortable with, investors abandon low and high yielding assets they don’t understand and there is a general stock check. UK equities are not expensive on an historic basis. However the credit crunch will almost certainly impact on economic growth (we just don’t know to what extent as yet) and this will feed through to company earnings. At such a turning point we therefore we have to consider whether equities look expensive on a forward basis. We believe UK equities may fall lower before regaining their upward trend.
We believe that high conviction equity funds rather than broad based funds will be the way to generate returns moving forward. These funds have wider investment remits than the typical UK equity fund and are therefore able to rotate their portfolios to suit the markets. In addition they typically hold far fewer stocks, hence the name. We will be contacting you with our recommendations shortly.
Stellar Wealth Managements Performance Related Fee dictates that our company is rewarded only when our clients make money. Rest assured we are spending a great deal of time and effort working towards this goal.