Key takeaways from the week

  • The latest statement from Federal Reserve's Chair Yellen relayed a very dovish message, which resulted in many investors pushing back their next US interest rate hike expectations to June;
  • In Europe, markets shrugged off a modest improvement in the single market's manufacturing sector. The European Central Bank's easing mode continued to support government bonds. In the UK, the latest manufacturing report confirmed a slow-down in activity. This, combined with persisting "Brexit" concerns, weighed on market sentiment; and
  • The US dollar lost some ground on the back of Janet Yellen's latest comments. The euro, on the other hand, rose against most major currencies, reaching its highest level against the sterling since December 2014. The Japanese yen fell against the euro, but strengthened against the US Dollar and sterling despite falling corporate confidence.


The emerging roller coaster

The article below highlights something key about emerging markets. Many international investors have taken on exposure to emerging markets over the years, on the basis that they have an aggressive attitude to risk.

The famous China growth story has led most people to equate the term "emerging market" with "golden investment opportunity". This could well be the case for many frontier and emerging markets over the next 10 - 20 years.

It cannot be underestimated however, just how challenging the political and economic hurdles to creating sustainable growth are to implement. Emerging markets are a roller coaster ride for investors under calm market conditions, never mind the recent turbulence. They may be starting to look like good value but the fact remains they are not for the faint hearted. Keeping exposure to sensible limits and being prepared for a wild ride will be a must for most people.

Even though China has the world's second largest economy, all emerging markets combined make up only 6% of the entire world's equities (the US alone makes up over 50%). If your portfolio has more than 6% in emerging markets, then you could be in for a bumpy ride.

 

Market data

Equity Indices Value Weekly Change
FTSE 100 6,146.05 0.65%
S&P 500  2,072.78 1.81%
Hang Seng 20,498.92 0.75%
Shanghai Composite Index  3,009.53 1.01%
Nikkei 225 16,164.16 -4.93%
Dax 30  9,794.64 -0.58%
Bonds  Value Weekly Change
US 10 yr 1.77% -7.34%
UK 10 yr 1.41% -2.84%
Commodities / Energy Price Weekly Change
Gold $1,222.6  0.45%
Brent Crude Oil $38.67 -4.58%
Currencies Majors Value Weekly Change 
EUR-USD 1.1391  1.97%
USD-JPY 111.69 -1.24%
GBP-USD 1.4227 0.67%
Central Bank  Rate
Fed Reserve 0.50%
ECB 0.00%
Bank of England 0.50%
Bank of Japan -0.10%

Prices as at Friday 1 April 2016.

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