Global Stocks Look Vulnerable – Black Rock Investment House have recently published their view on Word Markets, they state that “Equities no longer look cheap. The MSCI World Index is up 14% from its mid-February low, as stocks have shaken off fears of a global re-cession, an oil-price collapse and a Chinese currency devaluation.
Black Rock state that U.S. equity valuations sit around the 70th percentile of their long-term historical range and stocks overall appear more vulnerable to short-term risks. These include a Fed that increases rates too aggressively, Brexit, the worsening European immigration crisis and a slowdown in global growth. They see less upside to China’s growth expectations after a recent increase in activity, and oil prices have rebounded a long way and now reflect improved fundamentals.
They have downgraded U.S. and European stocks to neutral and prefer stocks to government bonds, and within equities, they like global divided-growth and quality stocks. BlackRock expect the Fed to raise rates once or twice this year, and also see the potential for a corporate earnings recovery later in 2016. What would make BlackRock more bullish? Evidence of reflation, and an emphasis on expansionary fiscal policy and structural reform over monetary policy globally.
Yields have started rising again. Higher U.S. inflation and hawkish Fed comments have now put a summer rate increase back on the table, increasing investor anxiety and the likelihood of near-term volatility.”
The BlackRock view merely adds to our concerns about investment markets in the short term, as we have previously stated the long term rolling average market indicators are also largely negative.
This all supports our concerns which we have been expressed repeatedly over the last ten months, we have recently increased our allocation to cash in our investment models.
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