Falcon Perspectives - February 2011
Investment Compass gives an insight into the investment decisions of our specialists.
FALCON PERSPECTIVES - FEBRUARY 2011
Investment Review and Outlook
Upbeat macroeconomic data and strong corporate earnings have driven equities above pre-Lehman crisis levels. The S&P 500 Index is trading at the highest level in two and a half years. Emerging markets, which have led the global bull market so far, have markedly underperformed in recent months. We expect this trend to continue. China, India, Brazil and other countries are facing sizeable monetary headwinds due to rising pricing pressure, boding ill for stocks. For the first time in some years, inflation made headlines in the developed world, too. Events in Egypt and other Arab countries have so far had no sizeable market impact except for the rising oil price.
However, the equity market is never a one-way street and a consolidation is overdue as the S&P 500 Index, the world’s bellwether equity market gauge, rose 25% in the last six months. Nevertheless, in general, we remain positive on equities. On the back of investor’s rising risk appetite and the search for return, riskier asset classes such as commodities, high-yielding bonds or hedge funds should continue to perform. On the other hand, the expectation of rising capital market interest rates is likely to provide a challenging environment for government bonds.
Investment Review and Outlook