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Author: admin, 23.03.2014. Category: The Power Of Thinking

And if you believe this commodity crunch is all about some temporary oil supply glut, think again. We produce a number of publications that we think will be of relevant interest to our private clients. We provide financial advisers and their clients with publications that we believe will be of specific interest to them.
Please see below for a list of publications that we have produced with the interest of all of our clients in mind.
Our charities newsletters reflect on the issues and topics that are of interest to trustees. Our wide range of publications and industry news articles have been produced with the interest of all our clients in mind. IW&I is committed to excellent investment research and we have invested heavily in our dedicated central research resource. The team also co-ordinates the firm’s investment process, helping to formulate our house strategy. We seek to get the best of both worlds by using a collegiate approach throughout the investment process. This belief is embodied in the fact that all of the key decision making committees in the investment process are comprised of more Investment Managers than researchers. The overall success of our business relies on this house message being a guide, not a straitjacket for the Investment Managers. In 2013 it is notable that equities have risen despite a rise in bond yields and a background of reduced earnings estimates as recovery was once again postponed. It seems almost trite to suggest that 2013’s equity investment bounty was the result of potentially damaging events not occurring, but as in 2012, this was demonstrably a key driver of returns. As we head into 2014 we are aware that equities no longer offer the bargain basement valuations that were apparent last year and their prospects are therefore much more dependant upon near-term earnings growth.
Nevertheless, it is clear that much of our fate remains in the hands of politicians and central bankers.
We are of the school that regards the possibility (and ultimate reality) of the end of quantitative easing as a positive sign, whilst also believing that its withdrawal can be managed without derailing the economic recovery.
We are of the school that regards the possibility (and ultimate reality) of the end of QE as a positive sign, whilst also believing that its withdrawal can be managed without derailing the economic recovery. In spite of these thrills and spills, more tangibly the US economy continues to lead developed markets towards sustainable recovery, a development that we believe will only have been temporarily disrupted by the deficit dispute.
If the focus on matters in the US seems too great, it is only because its influence on global economies and investment trends is all-embracing.
Elsewhere in the emerging world, we are focused more on the positive secular trends and less on shorter-term cyclical and liquidity threats. Closer to home, the UK has surprised everybody with its strength, and promises to be the fastest growing economy amongst the major developed countries.
We see prospects for concerted growth in all the main economic blocks for the first time in several years, which suggests that earnings should rise, potentially by low double digits. In the event that our thesis is wrong, it is clear that central banks (with full governmental support) are scared stiff by the threat of deflation and will use any means to avert it.
Headline writers became obsessed with the idea of a “Great Rotation” from bonds into equities, and while there is plenty of merit in this theory, there is limited real evidence of it occurring yet. The 3D printer and services market is still small – estimated by consultancy, Wohlers Associates, to be worth $2.2bn worldwide in 2012 (up 29% on 2011) – but growing fast.
The news prompted a wide range of reactions, from wonderment at what this emerging technology can achieve to despair at the potential for the proliferation of home-made guns. Lukas Daalder is in het verleden wel eens als ‘Nederlands best bewaarde geheim’ op het gebied van economie genoemd.
Disclaimer: All links provided are collected from public websites, unless otherwise specified. Lukas Daalder is in het verleden wel eens als ‘Nederlands best bewaarde geheim’ op het gebied van economie genoemd, en publiceert dagelijks een collectie met grafieken, nieuws en informatie.
There are 19 commodities that make up the CRB Index: Aluminum, Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Lean Hogs, Live Cattle, Natural Gas, Nickel, Orange Juice, Silver, Soybeans, Sugar, Unleaded Gas and Wheat. They reflect the type of events, projects and associations that hold values that we respect and are in line with our own.
The publication is designed to share our thoughts on some of the key investment topics that are likely to occupy investors’ minds over the coming 12 months and beyond. Based in London, the team is currently 18-strong with an average industry experience of over 17 years. We are convinced that in a highly complex, rapidly-changing world, supplying a group of engaged, experienced professionals with the best available inputs in a disciplined framework results in better, more consistent decisions than any individual can hope to achieve on their own.
Our debates are therefore always pragmatic and relevant and our view of the investment environment, formed using a combination of in-house research in conjunction with the views of independent research organisations and challenged by our most experienced Investment Managers, is truly the “house” view. In short we embrace the guidance provided by an informed consensus, but emphatically reject one-size fits-all models for its practical implementation.
For most there was still much to be fearful of, not least sluggish economies, fiscal headwinds, trade imbalances, recalcitrant politicians, the Middle Eastern tinderbox, and even (recalling Franklin D Roosevelt in the context of a fragile financial system) fear itself. At the simplest level, equity valuations are driven by three variables: the risk-free rate of interest (cash or bond yields), earnings per share (reflected in the longer term by dividends), and a more nebulous factor known as the Equity Risk Premium (ERP), which conveniently encompasses everything that cannot be captured in the first two.
Happily, as the title of this article suggests, we are optimistic about both the global economic outlook and the earnings growth prospects. Over the course of2013 the focus of such risk shifted from the Eurozone to the United States, where for many it still lies.


Having negotiated one debt limit in January 2013 with the introduction of previously negotiated sequestration (spending cuts to you and me), they proceeded to drive the bus towards the cliff edge again in October, this time also trying to clear the barrier of the Debt Ceiling. Unemployment has steadily fallen to 7.3%, house prices are rising, and purchasing manager surveys have broken decisively above the 50 level that defines growth. Not far behind the US in importance comes China, now the world’s second largest economy, but the major contributor to global growth. Despite Cyprus succumbing to a bailout in March, in a deal that saw not only bondholders but also depositors taking a “haircut” – a move which set a scary precedent – Europe exceeded investors’ worst expectations. There is a widely held view that Greece will require a further bailout or debt restructuring, with Portugal also at risk.
The recovery is very much a domestic affair and was catalyzed by the government’s Help to Buy scheme, which guarantees 15% of mortgages taken out by borrowers with deposits as low as 5%.
We are positive on the prospects for recovery, and believe that investors could reward earnings that are better than current expectations with a higher valuation.
Deflation neuters traditional monetary policy and makes the repayment of debt an onerous, possibly impossible task.
However, relative performance data is beginning to suggest that the reputation of equities is close to being fully restored. For Cody Wilson, a 25 year-old law student from Texas, his fifteen minutes came in May 2013 when it was reported that he had built the world’s first fully functioning gun to be made with a 3D printer (although the firing pin was made of metal). Of course, 3D printing is not the first – and won’t be the last – new technology that has the power to do both good and evil. Hij publiceert dagelijks een collectie met grafieken, nieuws en informatie over internationale economie en financiele markten. I have not checked the data or information for accuracy used, and therefore do not guarantee that all data provided will be 100% correct. Hij is het hoofd van de afdeling Global Allocations en is tevens portfolio manager bij Robeco. Those who think the CRB Index says nothing about global growtha€¦invest accordingly at your own peril.
The plummeting value of the weighted average of these commodities is screaming one thing loudly: the rate of global growth is plummeting. By continuing to use our website without changing the settings, you are agreeing to our use of cookies.
We cover UK and International equities, fixed income and collective investments, including alternative investments and structured products. At IW&I we passionately believe that one of the great strengths of our business is the profound well of investment knowledge and experience that resides in our Investment Managers, but we also believe in the virtues of a dedicated centralised research function, acting as the eyes and ears of the firm. In spite of this the year started with a bang as the MSCI World Index rose 5% in January, a show of resilience in the face of adversity that set the tone for the rest of the year. In layman’s terms, the ERP reflects investors’ appetite for risk – whether they feel brave enough to be greedy or whether fear predominates.
The story is a simple one: We are expecting 2014 to be a year when the recovery in developed market economies finally starts to gain traction, whilst emerging market economies continue to grow. In the US, the engine room of the global recovery, both monetary and fiscal policy are at critical junctures. On a technical level, we think that QE was primarily necessary to compensate for a dysfunctional financial system, replacing the reduced lending inclinations of a temporarily traumatised banking system. Given previous outcomes, investors took the view that sanity would prevail, so financial markets reflected minimal stress.
Later in this document you will find a more detailed appraisal of our optimistic views on emerging markets. Internal devaluation and weak consumption allowed both Spain and Portugal to return to surplus on their current accounts, which served to alleviate much of the pressure on Europe’s periphery. There is also the fact that the ECB’s long-term refinancing operation (LTRO) programmes will expire around the end of the year. Export-led recovery would be more desirable and potentially more durable, but beggars can’t be choosers. The greatest tension will be between that growth and the potential withdrawal of liquidity by central banks. If continued low growth is combated by loose monetary policy, surplus cash will continue to flow into risk assets. However, if we didn’t think on balance that positive factors would win out, there would be little point in being long-term investors. Het aardige is dat je zijn updates in minder dan een minuut gelezen kan hebben, maar dat er tegelijkertijd voldoende stof tot nadenken tussen staat. The links provided do not necessarily reflect my personal opinion and should be seen as general interest: oftentimes I do not agree with arguments presented, but nevertheless think it is worthwhile to read them. In fact it could be the first year since 2007 when we have simultaneous acceleration in growth in North America, Europe and Asia – a recipe for positive earnings “surprises”.
Recall the reaction in financial markets to the speech made in May by Federal Reserve (Fed) chairman, Ben Bernanke, when he alluded to the possibility of ending the latest iteration of quantitative easing (QE) – what became known as “tapering”. Banks (in the US at least) are now on the front foot again and they are both able and inclined to resume their lending roles.
However, the situation is far from resolved, with an extension till February 2014 suggesting that we will have to endure the whole process yet again in the new year. The icing on the cake would be a resumption of wage growth, in which case the virtuous cycle of consumption and capital investment could resume, allowing companies to utilise their prodigious cash balances productively. Attempts to curb more aggressive lending practices during the second quarter of 2013 threatened the official 7.5% GDP growth target, leading the authorities not only to release the monetary stranglehold but also to sanction a new round of capital investment.


In Europe as a whole, the key purchasing managers indices moved conclusively over 50 into growth territory for the first time since August 2011. Spanish and Italian banks in particular have used the ECB’s LTRO programme as a source of cheap funding to invest in domestic bonds and are in no position to survive without it. At some point it is to be hoped that sterling’s post-crisis devaluation will finally allow us to take advantage of the recovery of our main trading partners in Europe. If risk assets have re-rated upwards on the tide of surplus money, it is only fair to expect some payback.
We are mindful of the fact that this could lead valuations to a less sustainable level, and would be willing to gently raise cash balances in order to take advantage of future setbacks. Lukas is het hoofd van de afdeling Global Allocations en is tevens portfolio manager bij Robeco. The strong rise in global stock markets in spite of these factors was therefore a concrete manifestation of increased confidence, founded both on growing trust in central banks’ extended support (unconventional monetary policies endorsing the purchase of “risky” assets) and upon the successful navigation of multiple (often political) challenges to the process of systemic repair. Once again, this optimism is not universally held, with the prospects for both Europe and emerging markets hotly debated.
Over the next month global equities shed almost 8% before Fed members were wheeled out at every possible opportunity to soothe nerves, introducing conditions to suggest that QE would only be withdrawn if the economy could bear it. Apparently the well-heeled sponsors of the Tea Party, fearful for their wealth, are minded to rein back their monstrous creation, which raises some cause for optimism, although, of course, the debt pile will remain.
Consumption was already under pressure from a laudable attempt to restrict conspicuous consumption and the distribution of lavish gifts amongst party officials and managers of state-controlled businesses, and this will likely restrict annual consumption growth numbers well into 2014. This was greeted by a surge of fund flows into European equity markets and a rise in the Euro to levels not sustained since early 2010. Meanwhile the government has initiated a charm offensive in Asia with the aim of taking a greater share of trade in that region. However, this is just one of the potential outcomes, and we outline it here to illustrate that we are neither omniscient nor oblivious to the risks.
Together these factors allowed memories of the crisis of 2008 to recede further – encouraging investors to place a higher valuation on shares due to greater certainty of future positive returns, rather than as a reflection of superior recent performance. Bonds were also heavily impacted, falling 5.3% as measured by the JP Morgan Global Aggregate Bond Index. We are also in the camp that believes that when the process actually starts, we are now braced for it, so last year’s jitters will not be repeated. Obviously this is a mixed blessing, as a strong currency threatens to undermine exports, but the European Central Bank (ECB) showed awareness of the deflationary threat by halving its base lending rate to just 0.25%. From a market perspective one must bear in mind that 75% of the revenues of FTSE 100 companies originate outside the UK, so global recovery will be much more important to the investment case. In any event, rising earnings and dividends should assure better total returns from equities than bonds. Our bond weightings will continue to provide insurance against a mildly deflationary environment.
With leading indicators such as business sentiment measures nudging into positive territory, this fertile ground looks ready to bear fruit.
At the same time carnage was visited upon emerging markets, where fears of a withdrawal of liquidity hastened an unseemly rush for the exit by more speculative funds. Traders will know that the Fed has shown its hand and that it will back off if the conditions are not optimal. However, the follow-up communique confirmed social and corporate reforms that should bolster growth and create greater equality. This is not due to be completed until October 2014, and will no doubt require further selective recapitalisations. It is almost surprising (given the low esteem in which equities are currently held, despite major indices making all-time highs) that total returns from equities now outstrip those from bonds over every relevant investment period from one year to thirty years. Gold, which is covered in more detail elsewhere in Vision, protects us against more extreme outcomes.
It was a great relief when tapering was deferred and equities have subsequently pushed on to new highs, but the inevitable “beginning of the end” of QE and its possible (negative) effects on markets remains a live issue.
Yes, the “Fed Put” appears to be alive and well and there is no reason to believe that the Fed’s new chair, Janet Yellen, will alter course.
However, the ECB also knows that this time it must draw a line under European banks’ solvency, and this will add more certainty to the economic and investment outlook.
That is the sort of statistic that galvanises asset allocators, and we would expect more support for equities. The party remains committed to completing reforms by 2020, and we should believe and take comfort from their intent.
We have been firmly positive on Europe and remain so – believing that most investors were far too gloomy on the prospects for recovery.
Bonds remain an integral component of balanced portfolios despite offering low nominal returns.
We continue to think this is the case, with a particular eye on the potential positive impact of an unshackling of the European banks’ lending capacity once their regulatory reviews are finally completed. Only five times over the last century have they provided a negative total return in the same year as equities have fallen, the last time being 1994.



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