November Market and Economic Update 2015

Meanwhile in China, the Central bank cut its policy interest rate and reserve-requirement ratio for banks in an attempt to boost credit growth in response to a continuing gradual slide in quarterly growth reports. In contrast, a statement from the US Federal Open Market Committee raised the possibility of an increase in interest rates at its December meeting.

Our view – general summary

• Equity valuations continue to receive liquidity support – Central banks in major developed economies have added over $7 trillion in liquidity since 2007. The European Central Bank and Bank of Japan are to inject more than $1 trillion by the end of 2015 and global interest rates remain highly accommodative.

• The asset allocation committee decided to further de-risk portfolios in October and remains concerned that the global economy and risk asset markets may be at or approaching an inflection point. Weakness in risk assets over the summer is seen as an early warning sign, and downside risks are currently outweighing upside potential in our outlook.

• We are watching global monetary policies closely, but we see a growing risk that Central banks are losing control of global markets as policies such as Quantitative Easing become discredited. We may see a shift in focus to fiscal policy action as politicians globally respond to the wealth inequality that recent policies have exacerbated.

• As a result, the committee has further reduced equity exposure, specifically in the UK and Japan, two regions particularly sensitive to global markets.

VIEW MARKET COMMENTARY