Archived article: This article was correct at the time of publishing. Tax, investments and pension rules can change over time so the information below may not be current.

Market and Economic Update – February 2016

Core sovereign bonds were one of the few bright spots for investors in January as events in China, further falls in the oil price and rising risks of a US recession weighed on global equity and high-yield bond markets. Recognised global equity indices briefly touched bear market territory, but subsequently managed to claw back losses partially, after Central bank communications and a rebound in oil offered support.

Gareth Lewis Gareth Lewis
19 February 2016

Our view – asset allocation summary

  1. Normal economic recovery expectations are excessively optimistic, and we remain more dovish on the US interest rate cycle than both the US Federal Reserve and current market expectations.
  2. We are watching global monetary policies closely, but we see a growing risk that Central banks are losing control of global markets as policies such as Quantitative Easing (QE) become discredited. We may see a shift in focus to fiscal policy action as politicians globally respond to the wealth inequality that recent policies have exacerbated.
  3. We believe our current cautious stance remains appropriate as we move into 2016. Significant challenges including potential Chinese defaults and currency devaluation loom large, but the timing of these is highly uncertain. After significant de-risking to the asset models in 2015, particularly in the second half, the asset allocation committee decided at its January meeting to limit further de-risking to the sub-asset class level.
View market commentary

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing. We aim to provide investors with information to help them make their own investment decisions although this should not be construed as advice or an investment recommendation. If you are unsure about the suitability of an investment or if you need advice on your specific requirements, we strongly suggest that you consider professional financial advice.

Past performance is not a guide to future performance.