11 August 2017

North Korea: A problem not of Trump’s making.

Missile development program slowly shifts the political balance

North Korea’s recent successful test of a missile capable of reaching much of the US mainland is clearly a concern but it is not because such an attack is imminent or likely. The history of military rocket development suggests that it will still be some years before North Korea could be assured of a successful, let alone multiple, strike on the US or even Guam. However, in the event of any attack, the overwhelming superiority of US forces would undoubtedly ensure the destruction of North Korea. Therefore in many respects Trump’s most aggressive comments this week were a statement of the obvious and investors should accordingly not over-react, even as volatility has risen during thin trading over the holiday season.

RSS - Strategic Insight
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*Multiple Sectors
Equity strategy and market outlook November 2017

In this month’s strategy piece, Alastair George believes that, in hindsight, we have been over-cautious in our strategic views during 2017 as equity market performance has been strong, despite the starting point of extended valuation multiples and progressively tighter monetary policy in the US at least. However, even a cautious strategy would have generated returns significantly above cash during the year. While we take no view on the outlook for the bitcoin price due to its speculative nature, we do see the coalescing of a significant amount of capital and infrastructure around blockchain technologies as a very important development. There are potentially disruptive implications for the conventional finance sector over the medium term as there is now an established network effect within the digital finance community. For the traditional finance industry, the risk is that the genie is already out of the bottle. There is no change to our strategic view as we continue to believe a cautious outlook is warranted for developed markets on the basis of valuations. However, recent economic surprise is increasingly positive and credit conditions are loose. Therefore a major fracture in markets in the near term remains unlikely in our view. We continue to believe that, as we may be late in the cycle, investors should combine a relatively modest level of market exposure with only carefully selected equities.

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