GLOBAL - Global equity investment is still too risky, according to Investec Asset Management.
Investec is remaining underweight in global equities, believing that equities do not yet offer compelling value and that the earnings outlook is risky.
Commenting, Chris Carter, strategist at Investec, said: “Following a fall of the magnitude we have seen, a so-called technical correction upwards had become more likely, and this has been happening over the past week or so.
“However, since we have seen three such major upward corrections since the bear market began in March 2002, we are still sceptical as to the sustainability of this frenetic rally.”
Investec believes that the main problem facing global markets is still one of valuation. For example, “over optimistic” estimates for 2002 still gives a US p/e multiple of close to 20.
“Though in the context of the past 10 years, this appears a low number, by comparison with 150 years of US stock-market history, we believe it is still too high. In the meantime global economic momentum is very clearly deteriorating.”
Investec projects that bonds will continue to be supported by the sustained low level of interest rates but is concerned by the Federal Reserve’s single-minded focus on growth regeneration.
The firm also stays overweight in cash, despite returns being low, believing equity risk to be high while prospective medium term returns are still low.
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