Today I went along to one of the better market briefing seminars (there are a great many of them as you may expect). The media have been screaming about rising levels of inflation and how we are all due to face “soaring interest rates”… at least that was the headline I saw last night on the way home. The media are very much like the character “Corporal Jones” from Dad’s Army… “Don’t Panic!” being his regular cry, whilst doing precisely that.
Step up some sensible Fund Managers, with some reasoned logic and plenty of experience in the form of INVESCO Perpetual and the scene surveyed looks a little different. Yes there may be further bumps in the road – Neil Woodford thinks the UK recovery needs another 2 years. Markets though, are generally undervalued. Inflation… well yes it’s there, but the devil is in the detail and they don’t seem to be expecting any sudden shocks or dramatic rises… interest rates may tick up a little, but not much…the US are currently terrified of deflation which is far harder to pull an economy out of (ask the Japanese). As for the Eurozone crisis? There are some undervalued Spanish stocks – just because they are Spanish (!) and caught up in the sovereign debt crisis – the general view seemed to be that most of the problems with sovereign debt have been priced into the market and there is little real chance of Germany leaving the Euro as this would be self-defeating with a high Deutschemark making German goods expensive… yes it’s likely that Irish and Portuguese debt may need to be re-worked and eveyone might take a “haircut” but in the worst scenario a capital loss of 10% was suggested… which in terms of investment speak is small compared to any normal investment market.
Full marks to INVESCO Perpetual for another very good commentary, some common sense (I hope) – which in summary is: steady as she goes, keep to the course and expect the odd bump now and then, but any long-term investor is currently buying at fairly underpriced values. Of course by the time we next convene it may all have changed – such is the joy of financial markets and the crystal ball gazing… sorry I mean economic forecasting.
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