Don’t mistake equities’ current sanguine run for real strength

Added 24th November 2016

Investors should not rest too comfortably on the relative calm with which equity markets have greeted both the UK’s EU referendum and the election of Donald Trump to the US presidency warns Guy Stephens.

Don’t mistake equities’ current sanguine run for real strength

According to Rowan Dartington’s technical investment director, the primary explanation for their sanguine performance is the broad view within markets that they are “the least worst choice out of a poor hand where the negatives are hardest to define clearly”.

And, while such a view is understandable given the ongoing rout currently being seen in bond markets, the poor performance of many absolute return funds and the recent issues within commercial property, Stephens points to a number of looming equity headwinds, that could upset the applecart in the months ahead.

Number one on the list is Trump. If he is successful in bringing to bear his protectionist policies, says Stephens, they are likely to lower world growth.

“Trump has promised the redundant workers of Cleveland and Detroit that he will get their jobs back from China.  His government appointees so far are reputational nationalists - it is looking like he will be taking on China big time and that is bad news for world growth and we all know how paranoid investors are about Chinese growth slowing,” he said.

On top of that, he added, emerging markets have suffered at the hands of dollar strength and in anticipation of Trump's tariffs while Europe is about to embark on its own populist revolution.

Currency too has played a role in the outperformance that has buoyed spirits, Stephens said, adding that, while dollar earners have continued to be strong as the currency has strengthened, “this is no reflection of their underlying fundamentals”

In such a scenario, he concludes, the only solution is to spread one’s assets far and wide, in an attempt to “dilute the pain and participate in the gain, from wherever it may come”.


Overseas earners will be key amidst 2017 inflation

Sponsored by Neptune

Overseas earners will be key amidst 2017 inflation...

A by-product of sterling weakness is inflation, and we expect this to continue to gather steam over the coming months, with energy and food prices the hardest hit....

Kames Income Hub


Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

AXA Distribution Fund
AXA Distribution Fund

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Geoff Candy

Group digital editor

Geoff Candy joined Portfolio Adviser as News Editor in May 2014. He has been a financial journalist and broadcaster since 2005 and, in that time has worked in both South Africa and the Netherlands, covering everything from high street retailers and construction companies to mining and insurance.



Investment Strategy




PA Alternative Ucits 2017 Congress
PA Alternative Ucits 2017 Congress

Tuesday 25 April
The Langham, London

PA Europe 2017
PA Europe 2017

Thursday 11 May
Furniture Makers' Hall

PA Channel Islands 2017
PA Channel Islands 2017

Wednesday 24 May
Royal Yacht Hotel, Jersey

PA UK Equity 2017
PA UK Equity 2017

Thursday 15 June
Radisson Blu Edwardian Bloomsbury Street Hotel

Sponsored Content

Investment Strategy