Investment Clock insights

Are markets getting complacent about risk?

Trevor Greetham

18 July 2016

RLAM’s investor sentiment indicator for global equities has moved into euphoric territory on the back of expectations for looser policy in response to the UK’s vote to leave the EU – the U.S. Federal Reserve is now on hold and we expect further easing in the UK, Europe and Japan. 

We are modestly overweight equities on the back of continued recovery in the world economy, but we are not chasing the rally. While markets can sometimes remain in a euphoric state for months, we see possible downside risks linked to the UK’s Brexit negotiations, fragility in the euro area banking system and the US Presidential election. 

We would look to buy dips in commodities and the emerging markets, asset classes where Brexit will have a limited impact but where loose US policy is a major boost.

Source: RLAM, Proprietary Composite Sentiment Indicator

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.