Corrections in global markets are a reflection of reduced growth expectations, a challenging environment and the prospect of a first rise in US interest rates since 2006, according to an investment expert.
Momentum Global Investment Management CIO, Mike Allen, said that market weaknesses will persist in the short term but the search for higher returns and the prospect of loose monetary policy will give support to some markets. He added: “The UK is reasonably attractive but remains vulnerable to resource companies and knock-on effects from the EU. Wider Europe remains somewhat cheap but there is the risk of negative growth in the region.”
On fixed income, Allen said that bond yields are unattractive and the asymmetry of potential returns from the asset class is stark. “Investment grade is a reasonable replacement for government debt, but if taken in isolation the asset class is not particularly attractive.” On currencies, Allen said that the dollar is at, or near, fair value but that sovereign issues are beginning to weigh on the euro. On the yen, Allen commented: “A weak yen is good for the Japanese economy and as a result we expect to see continued downward pressure applied by the Bank of Japan. This may serve to weaken the yen further, but at the very least it should provide significant resistance to the upside.”