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29 May 2018

Long hot Italian summer.

Likely September elections may be a referendum on euro and EU membership

Italy’s failure over the weekend to form a government was driven by the refusal of the Italian President Mattarella to appoint the hardline Eurosceptic Paolo Savona to the position of economy minister. From the perspective of President Mattarella the recent election was not a referendum on the euro; for the Five Star/League coalition his refusal to accept Savona was interference in the democratic process. An incoming caretaker government is being put in place but is not the issue; elections later in the year will in effect be the referendum on the euro. For investors, this creates significant uncertainty over the summer months and into the autumn.

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4 November 2016

BOE: Bank on track.

Today’s BOE decision represents a correction in UK policy makers’ thinking. The sudden stop in activity which was implied by the Bank’s August stimulus package has not materialised and the focus has instead returned to significantly above-target inflation by 2018. This is going to be supportive of sterling, especially as consensus views on the exchange rate had become so negative.

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RSS - Strategic Insight
Sector report cover
*Multiple Sectors
30/05/2019
Equity strategy and market outlook - May 2019

In this month’s strategy piece, Alastair notes that the much-anticipated resolution to the US/China trade dispute has failed to materialise. Furthermore, the likelihood of any resolution in the near term appears modest at best. His earlier more positive views on equities for 2019 were contingent on a US/China trade resolution by mid-year and his outlook has therefore become more cautious. A downward turn in survey data and consensus earnings forecasts has been re-established and ebbing global earnings momentum during the past four weeks consistent with softer PMI indices and slowing trade data. Short- and long-term bond yields have fallen in recent weeks, reflecting market expectations of a slowdown. A steady build-up of debt in the corporate sector of China and the US will become a greater issue if the economy slows. Therefore, he believes investors should now focus on balance sheet quality in equity investments at this point in the cycle. He moves to a cautious view on global equities from neutral. Given the still significant rally since the year-end, there is time to reposition portfolios and he believes investors should focus on specific companies with lower than average exposure to cyclical factors and trade headwinds, given the cautious outlook.

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