‘ECB funding allows focus on growth’
Clients should remain invested in equities, or even to increase their holdings for the second quarter of 2012, Skerritt Consultants has claimed.
Andy Merricks, head of investments for the East Sussex-based IFA, said the European Central Bank’s long-term refinancing operation had fuelled a rally in the markets that should avert a potential systemic banking failure in the eurozone in the short term, and allow investors to focus on growth prospects and recovery.
He added: “Any growth means that it’s not recessionary and companies can benefit accordingly. But for how long can markets keep rising?”
Referring to gold and the dollar, Mr Merricks said: “There are a number of statistics that suggest a strong correlation between a strengthening dollar and weak gold prices. Gold has been a safe haven, like government bonds, during the market turmoil which has seen its value soar. The big question then is should clients sell out of gold?”
He said that despite the relative strength of the dollar, a report by BCA Research had described it as “the best horse in the glue factory”, a reference to the comparative state of the euro, sterling and the yen as its main rivals, and that gold was still a valuable commodity.
Mr Merricks said the firm’s overall stance would be to continue to advise clients to maintain or slightly increase their equity exposure, particularly towards energy, the Japanese and Russian sectors. Skerrit also backed maintaining a holding in precious metals and high-yield bonds.