Volatility in financial markets is growing. Here are pointers on where there is still value or a strong supporting trend.
P.S. The latest TopFunds Guide is available shortly, and has more detail on this and much more besides. Email or ring to reserve your copy.
This is being written just ahead of the Greek referendum – much could change in the days and weeks ahead, particularly if there is a “No” vote. Whatever the result, belief in the eurozone, and the credibility of its leadership, has been undermined.
The eurozone must reform if it is to go forward, or retreat to a simple pure free trade union, the EU. By standing still it leaves itself at the mercy of voters, who are stirring all over Europe. The Spanish election in the Autumn will be particularly telling.
In a world of growing volatility (the extremes being most evident in long dated bonds and Chinese equities) it is worthwhile considering areas where there might be genuine value.
There are four broad possibilities.
The first is cheap but uncomfortable. Japan has been in this category for year. Now you need to hold your nerve and recognise the ongoing reform process. UK commercial property (bricks and mortar) outside the SE of England also falls into this category (in contrast to central London, which is bubbly).
Secondly where short term reforms are unlocking longer term potential. In addition to Japan, India is the most startling example. It is already the fastest growing major nation, and weakness in the stock market in 2015 is an opportunity. It will soon be the most populous country in the world, and by 2030 the third biggest economy.
Ageing populations are the third category. They create growing demand for increasingly scarce income sources, where governments and employers are taking less and less responsibility. In 2000 the world had 600 million people aged over 60. By 2050 this number surges to 2 billion. High yielding equities (encapsulated in equity income funds) will be a buy for many years to come.
Last but not least places of safety. In the case of the US dollar, this is a refuge in extremis. In any event it is attractive due to US rates going up more quickly than anywhere else in the world. In the case of UK commercial property mentioned above, it also falls into this category as the price is not correlated to increasingly volatile equities and bonds from day to day.
There is more detail on the above, and much more, in the latest TopFunds Guide, which is on its way to the printers shortly.
Do email back to reserve your copy of the 29th edition of the TopFunds Guide.
