20 July 2015

Market Comment: Muddling Through

When last I shared my thoughts on what might be in store for markets, investor confidence was being assailed from a variety of directions


Perhaps the most telling signs are those that can be found in the behaviour of other assets. Gold has taken a tumble, falling to a five year low. While this might owe much to expectations of a rate rise in the US, it also signals that the worry factor in markets has diminished. Expectations  that an interest rate rise is getting closer here as well, following remarks by the Governor of the Bank of England, has led to the pound performing well on foreign exchange markets, though continuing concerns over Europe will have helped.

It should come as no surprise that the euro should be under pressure. While a Greek exit from the single currency zone has been avoided, none of the participants in the discussions have exactly covered themselves in glory. Citizens of Greece are doubtless much relieved that their banks are once again open for business, albeit in a restricted fashion, but there will be much underlying anger at the measures demanded by those providing the bailout cash.

Still, we find ourselves at the height of the holiday season with the euro having slipped below 70 pence in sterling terms for the first time in some little while. True, buying your holiday euros at that rate across the counter will probably prove tricky, but many of the currency exchange services now available should be offering similar terms. The silver lining could well be cheaper holidays for those of us fortunate enough to be outside the Eurozone.

Meanwhile, UK residential property continues to power on, according to the latest Rightmove house price survey. Apparently prices rose more than 5% year on year in July – a bigger increase than for the previous month. And dividend growth for UK companies was at a record 12.7% for the second quarter of this year. No wonder there is more consumer confidence at home these days.

Brian Tora is an associate with investment managers, JM Finn & Co


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