Keeping up to date with the general outlook for various stockmarkets and assets is an important part of investing. Yes, markets are very difficult to accurately predict, so it's sensible to invest
long term and avoid making big short term bets (unless you like to gamble). But sensible portfolio adjustments that reflect your views can be a good idea.
Please bear in mind our views are just that - they may or may not prove to be correct. If you use any of the below information it's entirely at your own risk. Candid Money Limited cannot be held
responsible for any losses you may incur.
| Region | Forecast | Short Term View | Longer Term View | 1 yr Return |
|---|
| UK |
 |
Markets remain volatile due to variable economic news. Rising oil prices (energy companies comprise c20% of the FTSE 100) have helped, but concerns over the outlook forthe UK economy seem to periodically drag markets back down, epecially so recently. High dividend yields have been attracting some investors in this low interest rate climate. I'd expect the unpredictable volatility to continue with a further general decline over the rest of this year as the economy deteriorates.
Last updated: 08/08/11 |
In trying to combat the global downturn the Government has borrowed massively, with the National Debt expected to hit £1.1 trillion during 2011 - over £40,000 per household. The coalition government is banking on private sector growth overcoming the negative impact of tax rises and public sector spending cuts - a big gamble that could hinder Britain's recovery efforts. Interest rates are likely to remain low which, coupled with high Government borrowing, could further weaken Sterling, which could also help the UK stockmarket as it generates around 2/3rds of its revenues overseas. The next few years will be difficult and recovery could be a drawn out affair.
Last updated: 12/03/11 |
-4.0%
06/10/11 |
| US |
|
US Government stimulus spending appears, to some extent, to have filtered through to the US stockmarket. I was surprised at the rises preceeding the recent falls, despite some corporate earnings have been strong. The markets remain very nervous and will probably continue to react quite sharply to global economic news, good or bad. I can't see much reason to be particularly positive yet and would be wary about placing big bets on the US stockmarket this year.
Last updated: 08/08/11 |
The US continues to suffer from the global downturn, although vast Government 'stimulus' spending has helped cushion the fall and appears to have gotten the economy growing again, for now at least. But home repossessions remain high and although unemployment has fallen a little to 9%, it's still high. The Federal Bank's pledge to keep interest rates low for an extended period may help, but I fear unless the Government keeps throwing money onto the bonfire of economic recovery (as it has to date) it could struggle to keep burning. The US remains the world's largest economy, but is also one of the most troubled. There are glimmers of hope but a sustained recovery could take several years, with lots of volatility meanwhile.
Last updated: 12/03/11 |
1.9%
06/10/11 |
| Europe |
 |
Germany has been a driving force thanks to exports growth, although if emerging markets growth continues to slow then European exports will suffer. The growing imbalance between disparate eurozone economies is an increasing problem, so while strong exports are a reason to be cheerful, economic woes in Greece/Portugal/Ireland remain a problem - especially bad news for the euro and Germany and France (which tend to bear the brunt of any bailouts).
Last updated: 08/08/11 |
Continental Europe has suffered from the same woes as the rest of the world during the global slowdown, falling house prices, reduced demand for goods and services along with rising unemployment. Greek and Irish finances remain troubled and concerns are growing over Spain and Portugal too - all bad news for the euro. Germany and France both look stronger than their neighbours, with Germany especially benefiting from strong manufacturing exports to emerging markets. But there's a risk the weaker eurozone economies will drag down the whole region, so the going could remain tough.
Last updated: 12/03/11 |
-8.9%
06/10/11 |
| Emerging Europe |
 |
Oil price rises have been music to Russia's ears. If oil prices remain high then Russia's domestic economy should continue to benefit from more money sloshing around the system - especially goods news for its stockmarket. But a volatile oil price means volatile markets in the region, so be careful.
Last updated: 08/08/11 |
Emerging Europe is dominated by Russia, which in turn is dominated by oil & gas. The trend for rising oil prices is helping both the Russian Government (most of its revenue comes from tax on oil) and stockmarket. However, Russia still faces big problems. Banks are struggling, hence unwilling to lend, consumers are spending less and unemployment is rising (sound familiar?). Expect another difficult year or two before Russia starts to get back on track. Elsewhere in the region, Governments are suffering from spending more than they receive and falling exports have hurt. Poland and Turkey have fared a little better thanks to less reliance on exports, but they've still suffered from the global slowdown. Still a good bet over 10 years or more, but Russia's reliance on oil means volatility.
Last updated: 12/03/11 |
-18.5%
06/10/11 |
| Far East |
|
Stock markets in the region are heavily influenced by China, so recent fears of a slowdown in China (in part due to rising inflation) have taken their toll. Nevertheless, there is reason to be positive as growth prospects generally remain strong, with Singapore leading the way.
Last updated: 08/08/11 |
Exports are the engine that primarily drives these economies along, so it's no surprise that the global downturn caused a few misfires. The extent that domestic consumers spend their hard-earned cash is also important. Taiwan, Singapore and Malaysia struggled the most, with exports to the US and Europe falling - but have started to bounce back recently. Their speed of recovery very much depends on the West and, to a lesser extent, domestic spending. South Korea is faring better, with exports falling by less than its neighbours and domestic consumers continuing to spend freely, probably thanks to low unemployment. Indonesia looks the best placed of the lot as Government and consumer spending has helped its economy to continue growing. While the region will probably lag China over time, growth prospects look more promising than the West. Expect volatility, but a decent long term bet.
Last updated: 12/03/11 |
-6.5%
06/11/11 |
| China |
 |
Concerns remain that rising food prices will slow China's short term growth. Chinese households spend around one third of their income on food, so rising prices leave them less to spend on other things, hindering the much expected rise in domestic demand for goods and services. But better weather this year could ease the food price situation and help markets get back on course. Risky, as usual, but some reason to be optimistic.
Last updated: 08/08/11 |
Even though the global downturn has undoubtedly hurt China, it's managed to seemingly brush aside the worst of it in a way the West can only dream about. Reported economic growth remains strong with rising domestic demand appearing to compensate for lower exports. The main reason for China's resilience has been Government intervention. The Chinese Government has been more successful at getting its banks to lend compared to others (autocracy can be a good thing at times!) and its pockets have been deep enough to throw a mountain of cash at the problem without getting heavily into debt (a luxury neither the US nor UK have had). By spending on infrastructure projects China is propping up employment, resulting in consumers spending freely, and further advancing its march towards global dominance. There'll be a few storms, possibly hurricanes along the way, but it's hard to resist China as an investment proposition over the next 20+ years.
Last updated: 12/03/11 |
-26.0%
06/10/11 |
| Japan |
 |
The earthquake earlier this year has made life even more difficult for the already troubled Japanese stockmarket. Political deadlock is preventing new policy to try and reduce the country's gargantuan debt and while many Japanese companies are now quite lean and fit, most continue to struggle. Very difficult times ahead.
Last updated: 08/08/11 |
If China is Asia's economic hare then Japan is its tortoise, and sadly not a very healthy one. The global slowdown has led to falling exports and rising unemployment, both bad news for an economy that was already more fragile than many. The Japanese Government's efforts to spend its way through the crisis have met with some success, consumer spending has stabilised, but this has been at the expense of record borrowing. Japan has the highest gross government debt of any industrialised country. This doesn't present too big a problem as long as Japan's interest rates stay near zero (currently 0 - 0.1%), but could strangle the economy if rates rise in future. Japan also has an ageing population, which could naturally put the brake on consumer spending in years to come irrespective of the global outlook. I'd favour investing elsewhere.
Last updated: 12/03/11 |
-12.1%
06/11/11 |
| India |
|
Inflation and government debt remain a problem while high oil prices are generally bad news for Indian markets. But, on the whole, Indian stocks don't look bad value for money, although more shocks could continue to fuel volatility.
Last updated: 08/08/11 |
India has weathered the economic storm beter than most, continuing to deliver positive growth. The Indian Government has helped by pumping money into the economy, but it's rather cash strapped thanks to spending more than it could afford in the past. Plans to privatise a number of state industries might help replenish the coffers, but balancing the books will still prove a tall order. The IT, financial and energy sectors drive the Indian stockmarket, while agriculture remains the main economic driver, employing 60% of India's workforce. Agricultural prospeirty relies heavilly on weather and global demand, both rather volatile these days. India's prime minister was recently quoted as saying corruption is the single biggest threat to the nation's economic prospects. Changing this culture won't happen overnight. India is growing quickly, but it still suffers from widespread poverty and there's plenty of potential growing pains in store. Invest for 10-20 years.
Last updated: 12/03/11 |
-29.4%
06/10/11 |
| Latin America |
|
The US and China are key export markets for Latin America, so concerns over a slowdown in these markets will hurt. Nevertheless, domestic demand is growing and higher oil prices will generally help the region, so there's scope to recover some of the recently lost ground.
Last updated: 08/08/11 |
If you buy a Latin America investment fund, your money will invariably find its way to just a handful of countries and sectors. The two heavyweights in the region are Brazil and Mexico, whose economies are dominated by the commodities/oil and telecommunications/consumer goods sectors respectively. While volatile oil and commodity prices have shaken the Brazilian economy, it seems to be weathering the storm intact. Growth is set to be positive over 2011 thanks to consumers continuing to spend and investment picking up. Mexico is feeling the pinch more, as its economy is more closely tied to the US. The Government has already started to raise taxes (to reduce debt) amid strong opposition, prompting fears that consumer spending will suffer. Expect a roller coaster ride, as is usual in this region, but prospects over the next 10 years look promising, especially in Brazil.
Last updated: 12/03/11 |
-19.3%
06/10/11 |
| Region | Forecast | Short Term View | Longer Term View | 1 yr Return |
|---|
| Investment Grade Bonds |
|
High inflation is not an ideal backdrop for investment grade bonds, but interest rates look set to remain low for some time. Fears over turbulent stockmarkets and middle eastern politics have increased demand for safer assets, a boost for bonds. I'd expect the market to be fairly flat over the rest of this year, as the above factors all more or less cancel each other out.
Last updated: 08/08/11 |
Investment grade bonds don't like rising interest rates. And with the Bank of England Base Rate at 0.5%, one thing's for sure, interest rates are bound to rise longer term. Lower inflation might offset the negative impact, but it's hard to drum up much enthusiasm for low risk bonds over 5-10 years. However, the downside is unlikely to be significant, so bonds with a reasonable yield don't seem such a bad idea after all.
Last updated: 12/03/11 |
1.0%
iBoxx £ Corporate Bond
06/10/11 |
| High Yield Bonds |
 |
High yields relative to cash and buoyant stockmarkets have helped the high yield bond market of late. But I'm concerned that a deteriorating economic outlook over the next few months may diminish the appeal of high yield bonds. Nothing too serious, but I can't see a reason for being overweight in this sector.
Last updated: 08/08/11 |
High yield bonds tend to more influenced by corporate health than interest rates and inflation - investors are primarily concerned over whether they'll get their money back. So the outlook is primarily determined by the economic outlook which, in the case of the UK, is not particularly encouraging. There is probably still scope to make money longer term, especially via decent yields (i.e. income), but the risk of default could be a concern.
Last updated: 12/03/11 |
-6.3%
ML Euro High Yield
06/10/11 |
| Region | Forecast | Short Term View | Longer Term View | 1 yr Return |
|---|
| Hard Commodities |
|
Recent volatility has pushed back the price of oil and other hard commodities, largely due to investors selling over fears of slowing global growth. However, the setback may prove short lived and we may well see prices start to creep back up. Gold has risen as economic worries worsen, although we could see a fall if economic expectations improve, prompting some investors to sell their gold piles.
Last updated: 08/08/11 |
Emerging markets demand for metals/energy (to build infrastructure) and gold (greater wealth to buy jewellery) have been the main drivers behind soaring hard commodity prices in recent years. This has been exacerbated by investors piling in too, due to a combination of optimism over growing hard commodities demand and viewing gold and other precious metals as a safe haven during troubled economic times. It's hard to see how demand won't outpace supply long term, but expect plenty of volatility short term.
Last updated: 12/03/11 |
-18.8%
HSBC Global Mining
06/10/11 |
| Soft Commodities |
|
Prices have soared over the last year as bad weather hurt crops, although prices have softened recently thanks to higher than expected supply. If the weather is more favourable this year I'd expect prices to fall-back further, but this sector remains very difficult to predict short term.
Last updated: 08/08/11 |
As emerging markets grow, so does their demand for food. And the trend for using crops to produce bio-fuel means rising demand for appropriate crops such as corn. Unlike hard commodities, it's easier to adjust the supply of agricultural produce to try and match demand, but weather and politics can sometimes get in the way. Bad weather last year reduced crop yields, causing soaring prices. Better weather this year should ease prices. Nevertheless, if the trend for growing demand persists longer term then prices are likely to rise over time, making soft commodities a good, albeit volatile, long term bet.
Last updated: 12/03/11 |
7.0%
DJ-UBS AG
06/10/11 |
| Region | Forecast | Short Term View | Longer Term View | 1 yr Return |
|---|
| Commercial Property |
|
The UK commercial property market appears to have stabilised after a rough few years. Current rental yields of around 6% look attractive versus cash and foreign demand has given the market a boost. The market could dip again if we slip back into recession later this year but I doubt the sector will be hit as hard as it was in 2008.
Last updated: 08/08/11 |
Commercial property investment performance is closely linked to economic prosperity. During downturns both prices and rental income may fall, due to vacant space, new tenants negotiating lower rents and some existing tenants going bust. While the reverse is true during good times. Having gone through good times in the 'boom' years, followed by bad times during the credit crunch, the commercial property market appears to have stabilised and rental yields look attractive. There could be trouble ahead if the UK economy falls back into recession over the next year or two, but should prove resilient longer term.
Last updated: 12/03/11 |
8.8%
IPD UK All Property
31/08/11 |
| Residential Property |
|
Sellers and buyers appear to be gridlocked which, coupled with tight mortgage lending, is causing the housing market to dry up. This appears to be keeping general sale prices higher than you might expect and the situation is unlikely to change until interest rate rises cause more forced sellers and/or sellers start to accept that their asking prices are mostly unrealistic in the current climate. If you do buy then try to drive a hard bargain.
Last updated: 08/08/11 |
There's little doubt that the meteoric rise in house prices over the 15-20 years cannot continue. Prices have risen far faster than earnings, to the point they're probably only propped up by a combination of rock bottom interest rates and a shortage of sellers at sensible prices. A gradual slide in prices over the next few years looks likely, but I doubt we'll see a crash in the conventional sense unless interest rates rise quickly, which looks unlikely.
Last updated: 12/03/11 |
-0.3%
Nationwide HPI
30/09/11 |
All indices shown in local currency. Stockmarket indices do not include re-invested dividends.