Signs the bear is finally hibernating

Published on Friday 15 August 2008 20:23

SINCE the last monthly update, there have been several encouraging signs that the bear market tide is slowly turning, writes Raymond Ellis.

The first happened three weeks ago when two very experienced investment managers put their heads above the parapet and suggested that the depressed state of the equity, bond and property markets is not Armageddon, but simply a correction within the seven/eight-year economic cycle, aggravated by an over-inflated oil price and the sub-prime mortgage fiasco. The second was the sudden correction in commodity markets two weeks ago and the third was the recent suggestion that UK interest rates had peaked and the next movement was likely to be down. There has been so much talk about the possibility of global recession, that these three glimmers of light must have lifted the spirits of our competitors and Angus MacDonald.

There have been no changes to the make-up of the competitors' portfolios during the course of the last month and yet there has been a significant improvement in the relative values of these portfolios. This can only be due to the IFA's original asset allocation and the fund selection and performance.

Returns from most equity income funds have improved considerably, presumably due to the turnaround in financial stocks.

The biggest problem our IFAs will have to tackle in the run-up to the year-end will be tackling the rising threat of inflation.

• Raymond Ellis is director of Scott-Moncrieff Wealth Management Ltd