Global equities were up again last week, continuing the long upward 2014 run which began in February, and hit a fresh all-time-high on Thursday. Overall, the bull market is now into its 65th month, the 4th longest bull market in history. Equities continue to be supported by the expectation of reasonably strong corporate earnings’ growth and low interest rates.

Valuations, however, have crept up with the 2014 price earnings (P/E) multiple now trading at 15.5X and the 2015 P/E at 13.9X; albeit equities remain better value relative to other asset classes. The global index (in euro terms) rose by 0.9% last week giving a total return year-to-date of 9.9%. All of the major markets were flat or up in local currency terms last week led by Hong Kong (+3.3%), which reacted positively to stronger Chinese economic data. The main theme of the week was the plethora of generally positive US Q2 earnings’ figures.
Eurozone bond prices were up again last week (+0.4%) and are up a staggering 11.9% year-to-date led by Spain (+15.6%) and Italy (+13.7%). The German 10-year bond yield remained constant at 1.15% last week, equalling its 2013 low. Prices have been supported by ongoing deflationary concerns and geo-political tensions in Ukraine. Equivalent US yields fell marginally from 2.48% to 2.47%. Commodity prices in general were up by 0.3% (in dollar terms) last week and are up 6.5% so far this year, albeit well off their mid-June highs.

 

 

 

Stability Financial ( House View)

We have seen the US equity markets continue another leg higher off the back of some very impressive US Q2 corporate earnings. However as previously stated we have seen such a strong rally over the last 6 months that it is in my opinion too late to be entering any long positions.  According to recent money flow figures we continue to see the retail investors enter at these levels when the institutional money remains parked on the side lines waiting for relatively cheaper entry points. Tomorrow we do have the FOMC meeting in the US, we are likely to see modest upgrades to the committee’s assessment of the economy, which could result in additional tapering measures ($10bn).

I do believe that clients should look to position themselves relatively defensive, potentially adding some safe haven asset classes to their investment portfolios, I think SIlver and Gold are looking like a good bet at the moment and the recent price action would suggest that we may see some upside over the coming weeks. It will also act as a hedge in the event that the stock market comes off its recent highs. Not only are we in overbought territory, we also have an abundance of geopolitical turmoil around the globe that the markets have largely ignored, I think we are very exposed to a market changing event and this is something we need to be aware of.