Recent events are bound to impact a fragile economic situation in the UK and will hit global growth in the second half of the year.We remain hopeful, but somewhat sceptical, that central banks and politicians can respond in an appropriate manner. The emerging bloc accounts for half the global economy and any policy response to recent events must include these countries, albeit that dealing with government debt levels in the developed world remains at the heart of the problem.
In the short term, the situation is bound to remain volatile, although looking further out, our experience in markets suggest that it is the relative valuations of assets which count in the long run, and we are long term investors. We note that, in contrast to 2008, money markets remain under no great stress, while strong corporate balance sheets underpin dividends. We have a preference for equities over government debt in our asset allocation strategy.
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