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‘Investors need to accept lower returns in new investment era’

Monday 22nd June 2015

Written by Conor Shilling

Investors need to accept the dawning of a new investment era, warns the boss of independent financial advisory deVere Group.
Nigel Green says that as we enter a ‘new investment era’, investors should expect lower returns from property, bonds and the stock market. 
Explaining what he sees as responsible for the new investment era, Green says: “The most common link is that Quantitative Easing (QE) has pushed down borrowing costs and driven cash savings into more rewarding investments.”
“The combined effect has been to inflate asset prices, from housing to shares to government bonds.”
He says the biggest question facing the market is whether assets preserve their value if/when the Bank of England and the Federal Reserve eventually normalise monetary policy and raise interest rates.  
“The U.S. looks likely to be about to find out, with market analyst increasingly confident of a Federal Reserve rate hike later this year.  The Bank of England might follow in a year’s time if wage growth starts driving inflation up,” he observes.
“The UK housing market is currently looking a bit subdued for another reason. This is the set by the Bank of England macro prudential regulations that limits how much banks can lend for mortgages. This is sensible, as it will curb house price inflation, but could come as a shock for the more recent wave of buy-to-let purchasers who expected quick capital gains to compensate for very slender yields in London and South East.”
Green concludes by saying that against the backdrop of a new investment era, good fund managers will come to the fore and secure the best stocks at the right times.  
“As ever in times of flux, there will be significant opportunities, as well as challenges, but the opportunities will be actively sought with a fresh different approach and outlook, and investors are likely to need to accept lower returns in this new era,” he says.

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Editorial Contact Details - Conor Shilling
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