Market Update July 2012
July was a solid, if unspectacular, month for most markets with modest gains enjoyed across the board.
Bond markets were lead, once again, by the super sovereign states and other perceived safe havens around the world. Emerging market sovereign bonds, as represented by the JP Morgan $ Emerging Bond index, were up 3.5% in July alone, bringing the year-to-date return to over 8.5% (not including any income payments). Corporate bonds also continue to perform well, especially the bonds of better quality companies.
Equity markets were mixed, reflecting continued uncertainty and unease about the continued direction of the global economy and the ongoing saga in Europe. Equity markets in the US and selected Asian markets stand out in a lacklustre world. We remain at a cross roads: whilst equity markets certainly have the prospect for significant price appreciation, it will probably pay to remain cautious for the time being as the possibility of further contagion from the Euro Zone and a potential for a global slowdown persist.
Commodity markets enjoyed a strong month generally, with agricultural markets being amongst the biggest winners. The Dow Jones- UBS Agricultural Sub-Index was up almost 14% over the month, reflecting supply shortages in the US as the Midwest experienced drought conditions and Russia tightened its export quotas.
With market direction uncertain, it pays to have an investment strategy which will rotate into safer assets if market conditions deteriorate whilst remaining flexible enough to add riskier assets as market conditions improve. If you would like to discuss whether I can help you or your clients implement an investment strategy like this, please do not hesitate to contact me.