Edison Strategy

Edison’s corporate strategy research is designed to keep senior management aware of recent economic developments and capital market activity through regular written updates, webcasts and face-to-face meetings.


Alastair George

Alastair George

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Market wobble? Still time to re-position portfolios

Even if some calm has now returned, the market declines this week are perhaps a little more disconcerting than usual as they have occurred with no obvious trigger and followed an extended period of very low volatility. This makes the situation a little more uncertain, as specific triggers can often be analysed, quantified and discounted. There is therefore the danger of investors becoming fearful of the unknown - and risk averse - should the declines become more serious.


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Equity strategy and market outlook - February 2017
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In this month’s strategy piece, Alastair George believes that little has changed in the global outlook during the past month and we remain cautious on equities, primarily based on valuation concerns. Earnings estimates do not thus far seem to be tracking the improvement in survey data leaving global market valuations at the upper end of historical ranges. We believe the recent surge in French sovereign risk relative to Germany highlights the imbalances at the core of the eurozone, which has this time manifested in a striking divergence of French and German macroeconomic performance post-2008. We would suggest the euro is not yet out of the woods.
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Equity strategy and market outlook - January 2017
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In this month’s strategy piece, Alastair George believes that even as headlines trumpet the arrival of Dow 20k, we are becoming increasingly concerned that the conditions for a sudden shift lower in equity markets are in place. The combination of high valuations on a global basis and the prospect of tighter US monetary policy in 2017 is sufficient reason to be cautious and a stronger dollar is unhelpful for risk assets. However, it is political uncertainty which is giving us pause for thought. Investors’ high degree of confidence in Trump’s growth- and US-friendly policies contrasts with the willingness to downplay the more worrisome components of Trump’s policy package, which lean strongly towards protectionism and a go-it-alone US foreign policy.
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Equity strategy and market outlook - December 2016
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In this month’s strategy piece, Alastair George writes that as there have been few changes in the investment outlook since our last update in this final note for 2016 he has reviewed our calls for the year. This is an important exercise for discovering any potential bias in our strategy forecasts. We are pleased to discover that the hits clearly outnumber the misses although the timing of our ‘buy’ ideas were much better than our ‘sells’ and the bias towards caution was unhelpful this year. For 2017, Alastair continues to believe US government bond yields are on a rising trajectory and maintains a cautious view on global equities, primarily on valuation concerns. Furthermore, a rising US dollar is likely to be negative for emerging markets and corporate profits forecasts globally. A period of underperformance for global equities cannot be ruled out for Q117, or at least until the uncertainty in respect of the interaction between US monetary and fiscal policy has been resolved.
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Equity strategy and market outlook - November 2016
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In this month’s strategy piece, Alastair George believes that Trump has surprised markets twice over, first with a Presidential victory and second a rally in risk assets. Alastair views this rally as largely due to investor positioning as nothing new has emerged from the Trump camp since the election. Investors should however continue to focus on valuations and the direction of monetary policy, even as he asks the question whether “Make America Great Again” could be compared to Draghi’s “whatever it takes” OMT announcement. A key difference is that in 2012 many asset markets in Europe were trading at distressed levels and this is not the case in the US in 2016. Therefore, while in some regards there may be a parallel, he does not change his cautious positioning on equities.
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Equity strategy and market outlook - October 2016
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In this month’s strategy piece, Alastair George believes that in an environment of increasing political turbulence, markets have sought comfort in relatively stable earnings estimates. He believes longer-term investors should consider trading earnings revisions to their advantage and overweight exposures to commodities, commodity equities and energy are no longer contrarian and should be reduced. In currency markets, the decline in sterling is much less surprising in the context of its significant prior overvaluation; Brexit has merely acted as a catalyst. Sterling is likely to remain volatile and relatively weak for some time, but current levels now reflect the known Brexit risks. He also believes investors should be screening for UK companies which are likely to benefit from weaker sterling with share prices that have underperformed international peers.