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Markets stay optimistic despite unrest

Thursday 10th March 2011
With unrest in the Middle East and the high oil price unlikely to quell concerns about inflation and growth, investors may well be feeling cautious about markets.

The Association of Investment Companies has collated the views of Global Growth investment company managers to shed some global perspective on the current problems.

Here are some of their comments:

Andrew Bell, Chief Executive, Witan Investment Trust said: "Exaggerated mood swings from 'double dip' type anxiety to inflation fears creating trading opportunities around a generally positive trend for equities. The current relative correction in emerging economies looks like an incipient buying opportunity."

Gerald Smith, Manager, Monks Investment Trust said: "Higher oil prices, which may or may not be a long-term phenomenon, add to pre-existing upward pressure on inflation that has its roots in the expansionary monetary policies of the world's leading central banks. The main reason to be optimistic about markets in the short run is the continuation by the US Federal Reserve of its policy of attempting to generate growth and inflation through boosting financial asset prices. However, over the longer run this could end in tears though. Also, I should say my views on inflation are not shared by all my colleagues."

Jeremy Tigue, Manager, Foreign & Colonial Investment Trust said: "In general terms, the inflationary threat from rising oil prices is more of a problem for emerging markets than for the developed world, as emerging markets are already struggling with high inflation rates but have less leeway to act through monetary policy, as interest rates are not at the historic lows currently seen in the West. Economic growth in the US is relatively healthy, although the call for higher interest rates in the UK may be hard to resist, putting greater pressure on an already struggling economy."

Katherine Garrett-Cox, Chief Executive of Alliance Trust said: "Inflationary pressures from the oil price, which has almost trebled in just over two years, have had a noticeable impact on growth, particularly in countries with a high energy dependency, such as China, India and Thailand. We believe it is unlikely that the recent instability in the Middle East will spread significantly and consequently do not expect to see recession-inducing increases in the current oil price. We are not making significant alterations to our portfolio and continue to see equities as our preferred asset class."

Annabel Brodie-Smith, Communications Director, Association of Investment Companies said: "The Global Growth investment company sector houses some of the oldest, largest, and lowest cost investment companies around. With the current unrest in the Middle East, and worries about inflation and the state of the global economy persisting, the sector is as relevant today as ever. By spreading risk across a variety of countries, the Global Growth investment company sector is a one-stop investment shop with a range of investment strategies."

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Mike Jones

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