Achieving perspective in an uncertain world
October 2010
Volatility in financial markets has increased markedly since the beginning of the global credit crisis in 2007, with investor sentiment oscillating according to variations in both the economic outlook and the policy responses of leading central banks and governments. Equity markets have risen strongly since their nadir in March 2009, but not without sharp changes in direction from one quarter to the next. In the meantime, wider capital markets have displayed seemingly contradictory trends, with yields on higher-quality government bonds matching Great-Depression-era lows, but the price of gold reaching an all-time high. In the period ahead, financial-market volatility seems likely to remain heightened, and patterns of returns from asset classes to be erratic. In this article, we consider the importance of maintaining perspective on the investment landscape, particularly during such challenging times, and we explain three of our investment strategies that we believe are well-suited to meeting the challenges posed to investors by highly volatile markets.
As we have described elsewhere, the maintenance of ultra-low interest rates by the world's principal central banks, and the increasingly complex web of government intervention, have given a 'Through the Looking Glass' quality to financial markets, with patterns of economic activity, capital flows and financial-market returns having to be viewed through the distorting lens of highly accommodative monetary and fiscal policy.
To read the full content, please download
Achieving perspective in an uncertain world
