Mark Preskett: Financial markets have started the year in a volatile mood and we've seen sharp sell-offs across all major equity markets. Indeed, it was a worst January for stocks since 2009.
There were three clear phases in the sell-off. The first was led by concerns over China's move to a dirty peg on its currency and the weakness in the RMB was translated as weakness in the economy as a whole. The second focused on the sharp oil price falls and more recently the negative sentiment has shifted to financials, particularly within Europe. Looking at year-to-date numbers, however, and the more recent rally has brought the S&P 500 back into positive territory for the year, although losses in the U.K. and Europe are still in the high-single-digits.
What has worked has been fixed income, particularly the long bond and it has proven once again to be a good diversifier against equity volatility in multi-asset portfolios.
Looking forward, our focus as ever is on the health of the U.S. economy and our base case is we will not see a U.S. recession this year. With this in mind, we have not moved underweight to equities within our portfolios and the recent sell-off has unlocked some good value for investors, particularly within emerging markets.
