A fresh fear is lurking on global financial markets – and it is not about trade wars, affirms a leading analyst at one of the world’s largest independent financial advisory organisations.
The message from Tom Elliott, deVere Group’s International Investment Strategist, comes as market volatility has increased in recent weeks.
Mr Elliott comments: “A fresh fear is lurking on global financial markets – and it is not about trade wars.
“It is that global GDP growth may have peaked in the current growth spurt, that began in early 2016.”
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He continues: “Add to this three other key factors to add to investors’ nervousness.
“One, the ongoing fear that a trade war will break out between the U.S. and other major economies. Although the trade dispute with China has eased a little in recent days, largely due to Xi Jinping, the Chinese President, making a conciliatory speech last week.
“Two, apprehension that a new wave of regulation will impact on the business models of some of America’s largest quoted companies, such as Facebook, Google and Amazon.
“And three, growing tensions between the U.S., the UK and France with Russia, and others, following Friday night’s attack on Syrian installations.”
He goes on to explain: “However, fundamentals remain supportive for stocks. Consensus estimates for global corporate earnings growth in the first quarter are at 15 per cent over the previous year, while for the S&P 500 index it is 17 per cent.
“The beleaguered U.S. tech sector is expected to see 22 per cent earnings growth, which will help sooth investors’ nerves.
“Despite the prospect of two, maybe three, more rate hikes from the Federal Reserve this year, and probably one from the Bank of England in May, monetary policy remains loose by historic standards in all the main economies.
“This supports risk assets, by keeping borrowing costs low for companies and their customers, and by keeping ‘risk free’ rates low and unattractive relative to the expected returns from stocks.”
Mr Elliott concludes: “Despite new geopolitical concerns, our investment positioning remains unaltered.
“We favour a long-term, multi-asset approach to investing, whereby investors choose a suitable combination of global equities and bonds – depending on their risk profile and investment horizon – and leave the portfolio unchanged. Too frequent rebalancing ensures winners are sold and losers are bought – which financial history, and common sense, supports.”