Expert predictions for world markets in 2011
The US Simon Laing, manager of the Newton American Fund:
"The latest Quantitative Easing barrage does little to hide the dire economic issues still facing the US, the housing market remains in the doldrums, while the unemployment rate is still uncomfortably high.
"Private investment and hiring growth looks set to be the focus of the US economic recovery, as well as austerity measures. Government-backed sectors, such as defence, look set to suffer as a result of a slowdown in government spending. However, US based companies that do business with countries in the developing world will continue to hold attractive investment opportunities."
Anthony Bolton, manager of Fidelity's China Special Situations:
"During the last few weeks the global bull market appears to have resumed. Emerging markets like China have benefited from the liquidity being created in the developed world. The Chinese economy has not been slowing down as fast as earlier expected and this will probably now happen in 2011.
"However, I continue to believe that the growth rate in China will still be very attractive relative to the growth rates being seen in the developed world."
Douglas Turnbull, Manager of the Neptune Greater China Income Fund and Co-Fund Manager of the Neptune China Fund, alongside Lead Manager Robin Geffen 2011:
Anti-inflation: going into next year, we see the tightening cycle in China accelerating to deal with inflationary pressures both internally, especially in terms of food prices, and also externally, dealing with the wall of cheap money being created in the developed markets.
However, in contrast to the continued innovative easing in the developed markets, this 'tightening' ought to be broadly market positive as a moderating influence.
Income: as the demand for yield grows and the opportunities for it become ever scarcer, investors will seek innovative ways to earn income. We believe that they will increasingly look to realise the benefits from the dividend stream already available in China, not to mention the dividend growth, capital growth and currency appreciation offered to equity income investors in this region.
David Leduc, manager of the BNY Mellon Global Strategic Bond Fund:
Up until this point, European policy responses to the eurozone crisis have erred on the side of being reactive rather than proactive. This has led to a lack of investor confidence, which in turn has put pressure on bond spreads and on the euro.
We continue to favour Italy, given that it is in the best health of all the peripheral eurozone economies, and our outlook for German growth is also positive.
David Simner, manager of Fidelity's Euro Bond fund:
"The low interest rate environment is likely to support ongoing investor flows into the asset class as part of a hunt for yield. Ongoing stress in peripheral european economies is also likely to support flows by encouraging diversification away from government bonds and into high-quality credit.
"Nevertheless, risks remain. Austerity plans are putting downward pressure on economic growth in the developed world and the threat of another sovereign debt crisis is still high. There is also increased political risk as european policymakers formulate new legislation. Therefore bond markets still face much uncertainty.
"However, overall, a slow growth, low inflation environment is typically a sweet spot for corporate bonds and I expect positive returns over the next 12 months."
Sam Morse, manager of Fidelity's european fund:
"Europe remains rich in stock-picking ideas regardless of the pace of its economic recovery relative to other parts of the world. In this uncertain environment, I believe it is even more important to focus on the stocks that I own, as well as on uncovering new ideas that will deliver good structural growth in the future, rather than becoming too focused on the economic backdrop."
MORE EMERGING MARKETS
Nick Price, manager of Fidelity's Emerging Market Equities fund:
"The secular drivers of emerging markets remains intact: attractive demographics, competitive advantages from low labour costs, an abundance of natural resources, increasing prosperity, productivity gains and sound fiscal management. These are especially attractive in comparison to the developed world, which is faced with fiscal deficits, imbalances brought on by quantitative easing and a deleveraging consumer.
"As a result, emerging market stocks have rerated in 2010 but, at this stage, I do not yet subscribe to the idea of an emerging market bubble. I continue to find attractive opportunities at reasonable valuations. Regardless of any near term volatility in equity markets, I remain extremely positive over the long term."
Teera Chanpongsang, manager of Fidelity's India Focus fund:
"Economies in emerging Asia are able to generate strong real GDP growth, driven by underlying structural growth trends such as a large labour force, growing domestic consumption and increased infrastructure spending. These provide compelling investment opportunities and should lead to strong earnings growth in the coming years. The robust growth in industrial production in the recent past has been eroding excess capacity quickly and I expect more greenfield and brownfield expansions."
This article was taken from Interactive Investor
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Lower interest rates encourage people to spend, not save. But when interest rates can go no lower and there is a sharp drop in consumer and business spending, a central bank’s only option to stimulate demand is to pump money into the economy directly. This is quantitative easing. The Bank of England purchases assets (usually government bonds, or gilts) from private sector businesses such as insurance companies, banks and pension funds financed by new money the Bank creates electronically (it doesn’t physically print the banknotes). The sellers use the money to switch into other assets, such as shares or corporate bonds or else use it to lend to consumers and businesses, which pushes up demand and stimulates the economy.
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
The total money value of all the finished goods and services produced in an economy in one year. It includes all consumer and government consumption, government spending and borrowing, investments and exports (minus imports) and is taken as a guide to a nation’s economic health and financial well being. However, some economists feel GDP is inaccurate because it fails to measure the changes in a nation's standard of living, unpaid labour, savings and inflationary price changes (such as housing booms and stockmarket increases).
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.
Generic, loosely-defined term for markets in a newly industrialised or Third World country that is in the process of moving from a closed economy to an open market economy while building accountability within the system. The World Bank recognises 28 countries as emerging markets, including Argentina, Brazil, China, Czech Republic, Egypt, India, Israel, Morocco, Russia and Venezuela. Because these countries carry additional political, economic and currency risks, investors in emerging markets should accept volatile returns. There is potential to make large profit at the risk of large losses.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).
A bull market describes a market where the prevailing trend is upward moving or “bullish”. This is a prolonged period in which investment prices rise faster than their historical average. Bull markets are characterised by optimism, investor confidence and expectations that strong results will continue. Bull markets can happen as a result of an economic recovery, an economic boom, or investor irrationality. It is the opposite of a bear market.
An individual employed by an institution to manage an investment fund (unit trust, investment trust, pension fund or hedge fund) to meet pre-determined objectives (usually to generate capital growth or maximise income) in prescribed geographic areas or investment sectors (such as UK smaller companies, technology or commodities). The manager also carries the responsibility for general fund supervision, as well as monitoring the daily trading activity and also developing investment strategies to manage the risk profile of the fund.