After six months of struggle, equity markets rebounded in July, and the recent strong earnings numbers from companies means this can continue, according to Bill Dinning, chief investment officer at Waverton.
Dinning said: “The earnings season has so far been good enough to allow the rally of recent weeks to continue.
Global equities rose 6.8 per cent in July, reversing the weakness witnessed in June and limiting the YTD decline in the world index to 5 per cent (all in sterling terms). Growth stocks led the rally, benefiting from the fall in bond yields as recessionary fears globally, remained at the forefront of investors' minds, and expectations for future rate hikes by the Federal Reserve were scaled back."
He said that while the global economic picture presently looks quite negative, the contraction of US growth over two consecutive quarters has led to markets showing significant concern about the onset of a recession.
"However, we believe that outcome remains uncertain despite an evident slowdown," Dinning added.
Alec Cutler, equity fund manager at Orbis Investments is more cautious. He said: “It could be that the rebound in July is the result of expectations having got so low, or it could be that investors just want to feel that things are back to how they were. That is kind of what happened at the start of the 2001-2003 market downturn as well.”
david.thorpe@ft.com
