Fiducia Wealth Management
Posted in Investing, Tax Planning on 06.06.13

The pro-equity stance that Fiducia adopted in the summer of 2012 was supported by a number of factors which occurred in the months leading up to that point. A substantial correction in global stock markets, amounting to 10-12%, had been witnessed, while significant improvements in Asian trade data and the US housing market had started to be realised. Since this riskier stance was incorporated into the portfolios, further positive developments have occurred which have vindicated Fiducia’s continued bias to equities. The expansionary monetary policy initiated in Japan, in addition to interest rate cuts in several emerging markets, have helped to encourage growth, while data from the United States has shown that a major spree of capital spending is on the near term agenda for many corporations as a series of replacement chain projects come on stream. Although the Eurozone is still a cause for concern, these positive aspects should bode well for forthcoming economic growth and hence maintaining a pro-equity stance is justified.

There is an increasing sensitivity amongst investors to the curtailment of Quantitative Easing efforts from Central Banks, as the effects on economic growth of unwinding such large stimulus packages are uncertain. However, the Federal Reserve in the United States has already indicated that it is unlikely to tighten policy until unemployment is significantly lower than it currently is, as doing so could undermine the fragile confidence that has built up in the past few months.

Defensive equity stocks have enjoyed a very strong period of performance since 2009, as investors have perceived these companies to be relative safe-havens within the equity space and have favoured the reliable dividend stream that they pay. In the past few weeks, however, the improving evidence as to the strength of underlying economic growth has caused cyclical stocks, such as those in the technology and industrial sectors, to begin to pick up again, a theme which should continue in the next few months as greater market scrutiny is placed on cyclical companies.

Turning to bond markets, there is now a widely accepted belief that valuations have become stretched, especially within the high yield space, with the risks now being faced not sufficiently compensated for. In light of this, there is a growing theme of investors turning against certain areas of the bond market, but unless an inflation shock or a rise in interest rates materialises, a large scale correction is unlikely to be observed. The concerns regarding the bond markets emphasise the importance of having a well diversified portfolio, a point that is further reinforced by the fact that a well diversified portfolio can help mitigate the recent diversionary trend of correlations between asset classes, an occurrence which increases the variation in return and overall risks.

Looking ahead, the aforementioned capital spending that is anticipated in the United States, in conjunction with pro-company policies and lower taxes that they are enacting, should lead to stronger economic growth in the country in the coming few years. Elsewhere, several economies under the emerging market umbrella, such as Brazil, Indonesia and China, are also looking attractive, although in the Chinese case one has to cast a degree of cynicism over the published growth numbers. The area that is still of most concern is the Eurozone bloc, with France, alongside their weak Spanish and Greek counterparts, now suffering from serious recessionary influences.

If you would like to know more about how we as Financial Advisers can help you  with your Investments then visit the Investment Management section of  our website: Investment Management or send us email at: [email protected]

The information contained in our website is for guidance only and does not constitute advice which should be sought before taking any action. The information is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Fiducia Wealth Management Limited, or any associated companies or persons, its officers or its employees, for any loss occurred in connection with the content hereof and any such action. Professional financial advice is recommended for every case.

Fiducia is a multi award-winning firm of Financial Advisers based in Dedham near Colchester situated in the heart of Constable Country on the Essex Suffolk border. www.fiduciawealth.co.uk

Fiducia Wealth Management Ltd. Dedham Hall Business Centre, Brook Street, Dedham, Colchester, Essex, CO7 6AD.

Fiducia Wealth Management Ltd. is authorised and regulated by the Financial Conduct Authority. FCA No. 408210

Fiducia Wealth Management
Posted in Investing, Tax Planning on 06.06.13