Our Investment Outlook for Q3 2013

We have published our latest Investment Outlook for the third quarter of the 2013.

We publish this document once a quarter to record the conclusions of our formal Investment Committee process.

This process puts us in a very strong position to make tactical asset allocation decisions to exploit short term market conditions and any associated investment opportunities.

The second quarter of 2013 was particularly ‘interesting’ for investors, as fears over an end to cheap money from central bank programmes of quantitative easing spooked both equity and bond markets.

The FTSE 100 index of leading UK company shares finished the first half up around 5% since the start of the year but had lost around 10% since the 13 year high of 6,875.62 points it reached in late May.

UK government bonds (gilts) experienced their worst quarter in five years following indications that quantitative easing would come to an end later this year. The benchmark 10 year gilt yield finished the quarter up 63 basis points, creating capital losses for those invested in this asset class.

Quantitative easing should only come to an end once global economic recovery becomes sustainable, creating an odd situation where equity markets could react negatively to positive economic news. Bad economic news could send stocks higher and bond yields lower. Strange times.

Even precious metals suffered during this period of investor nervousness, with the price of gold falling to below $1,200 an ounce at the end of June, its lowest level in nearly three years. This could signal an end to a good run for gold, a traditional safe haven during times of economic uncertainty.

The outlook for the various investment assets is complex against the backdrop of this artificial environment created by quantitative easing and its inevitable end. We are likely to experience a period of higher than average volatility combined with closer correlation between the traditionally non-correlated asset classes, before hopefully we see a return to more ‘normal’ investment conditions.

You can download our latest Investment Outlook report here:

Investment Outlook Q3 2013