Investment Outlook (November 2014)
The UK equity market has suffered its worst declines in over two years. Concerns of a synchronised global recovery no longer look assured. In particular, the Eurozone remains the area of greatest concern following dismal economic numbers coming out of Germany and fears it may slip into recession. The European Central Bank’s rhetoric and a weaker exchange rate have failed to prompt a revival in the region.
The lengthening list of geopolitical worries Russia/Ukraine, Gaza, Hong Kong and Ebola (to name a few) have merely added to the tension and uncertainty as investors revert back to “risk off” assets such as government bonds. With gilts and other developed government bonds continuing to offer derisory returns, and a well capitalised UK equity market offering a still growing yield of 3.5%, this may be seen as a buying opportunity for the braver investor. Nevertheless, equity returns of 2014, barring a sharp recovery, are likely to disappoint following a number of years of strong gains.