Skandia Investment Group (SIG) CIO James Millard explains that, despite the earthquake in Japan and rising oil prices, the company remains bullish on global equites…
We remain overweight global equities. The February Purchasing Managers’ Indices (PMIs) were very strong, suggesting that the global economy was growing very strongly in 2011 Q1. However, the earthquake in Japan and the rise in the oil price could turn what would have been a ‘great’ year for global growth into a ‘good’ one.
We think that the global equity rally that began in 2009 will continue, supported by the ongoing economic recovery, favourable valuations and low interest rates. It is perhaps significant and indicative of the strong positive trend that global equities have only fallen slightly in response to the earthquake in Japan, the unrest in Libya and the broader region, the resignation of the Portuguese Prime Minister and Portugal’s request for an EU bailout.
While the risks to the outlook have increased over the last two months, we think that the underlying drivers of ongoing economic growth, modest valuations and low interest rates in the developed world remain in place. We have further increased our exposure to emerging markets amid signs that inflation may be close to peaking in some emerging economies.