Investment update from Forth Capital
Investment background
We feel it prudent to inform our investing clients of events affecting markets at the moment.
2010 has been characterised by 'one step forwards, one step backwards' where positive corporate news has been offset by European Sovereign Debt problems. The FTSE100 is up 2% year to date and the Dow Jones Industrial Average up 5.5%. However, since the November highs the FTSE has fallen 6% and DJIA 4%.
As you are no doubt aware, the problems in Ireland (following on from Greece) have caused significant market volatility and we are concerned that Portugal will have significant problems in repaying/rolling over it's debt obligations in early 2011 possibly leading to another bailout.
Once markets gain momentum, there tends to be a snowball effect. The logical next step would be Spain, whose banking and debt problems are well documented. We then would have to consider further contagion into Italy, Belgium et al.
The short term reaction to such a 'Worst Case Scenario' would have major implications on the Euro as well as global equity and bond markets.
Other Investment factors to Consider
Until now, the major engine of global economic growth during 2010 has been Asia, in particular China and the performance of this region has been relatively unaffected by events elsewhere. We are seeing changes in this dynamic and the 'decoupling effect' may be over, at least for the short term.
US unemployment remains stubbornly high and we wait to see the effect of Quantative Easing.
What does all of this mean for Our investing Clients?
Forth Capital is taking a cautious view at present and would like to flag our short term concerns to our investing clients.
However, we must point out that those investors with a long term outlook shouldn't be overly concerned with short term volatility.
If you have any concerns about your investment strategy or are uncertain about any of the above, you can ask for a free investment review and a more detailed discussion anytime.