Ashburton - comment on recent weakness in global markets

Financial markets have suffered a widespread deterioration in sentiment in recent days. Global equities have declined sharply and emerging market assets have been hit particularly hard, leading to an abrupt rally in the US dollar against most currencies.

At the forefront of concerns are prospects for weaker economic growth, the ongoing European debt crisis and a fear that policymakers are running low on ammunition with which to fight a further slump in the world economy.

While we share some of these concerns, rapid market movements in recent days are suggestive of indiscriminate selling and not likely based on a rational assessment of the fundamental value of financial assets. In a rush for liquidity, overcrowded trades (e.g. emerging market currencies) and even previous safe havens have declined (e.g. gold). In our view, the force of the recent sell-off has been disproportionate to the evolving economic news flow.

We continue to monitor developments very closely and our asset allocation strategy is under review, as is always the case. Our Multi Asset Funds have been conservatively positioned since July when equity weightings were significantly reduced, although they have not been entirely immune from the market fallout (please click here to see the latest Fund Fact sheets). We are of the view that the sell-off in equity markets is likely to prove an attractive entry point around current levels, although we have not significantly changed our asset allocation. As and when strategy changes we will communicate promptly with our clients.