Over the last few weeks, equity markets have sold off sharply due to poor global growth prospects and concerns about high levels of government debt in developed countries. Investec has published two interesting articles that cover this topic, which we have summarised for your convenience below.
Emphasis on preserving capital, while markets digest poor global growth prospects.
- Expectations of slower global growth push equity markets lower, but boost bond markets.
- While interest rates in the US are likely to remain near zero, investors are favouring bonds over cash.
- Expect markets to remain volatile.
- The downturn in equities does not represent a general buying opportunity yet, however, there are quality defensive shares attractively valued.
- Three pillars to supporting performance in a portfolio at present: bonds, quality defensive stocks and gold.
- We expect gold as a currency to continue to perform well until western interest rates rise, which could take a few years.
- SA yields are still attractive in relation to U.S interest rates, attracting strong foreign investment flows.
Gold shares should continue to benefit from a stronger dollar gold price and a weaker rand.
- There is much market turmoil due to poor global growth prospects, US credit downgrade & high levels of Govt. debt.
- Gold shares have rallied since July, due to the surge in the dollar gold price & weaker rand.
- We believe the dollar gold price is in a long term bull market – this is due to loose monetary polices, rising US debt levels, & uncertainty from the Euro debt crises.
- In a world where governments are eroding the value of paper currencies, gold is a very attractive alternative currency.
- Ultra low US interest rates & concerns about the future viability of the dollar as the world’s reserve currency, support the dollar gold price.