The insurance of diversity as markets change

This article is part of
‘Balanced Managed’ funds - February 2014

As the UK economy strengthens, however, more domestic companies reach the point of being fully valued, thus posing a strong argument for ex-UK stocks. The sterling’s current position as the strongest of the major currencies may also create headwinds in 2014 by working against the UK export market, highlighting the appeal of stock markets further afield. Japan’s exporters are benefitting from the current weakness of the yen for this very reason, which was created by the incredibly aggressive monetary stimulus that Japan’s economy received to stave of its former prolonged deflation woes. Furthermore, from a sectoral perspective, while the UK is a strong hub for certain sectors, it does not do nearly as well in sectors such as health and technology where the US and Asia tend to host the clear market leaders. Growth regions, too, may offer a promising back-drop for investment. Emerging markets might have experienced the fall-out from the Fed’s withdrawal of stimulus, however their growth levels still easily surpass those of their developed counterparts. Emerging market equities can offer great opportunities, however we feel the key to successful investment is paying very close attention to each individual company’s fundamentals.

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