standard life"s KEITH SKEOCH believes global markets should give reasonable returns
Global markets should provide investors with reasonable returns during 2004, provided that they are willing to accept some risk, according to Keith Skeoch, acting chief executive of the investment arm of insurer Standard Life.
Skeoch said: "Last year saw the UK stock market rise following a three-year bear market. Investors are keen to know if the green shoots of global economic recovery witnessed last year will continue and what the future holds for different asset classes.
"The growth outlook for 2004 looks increasingly positive with accelerating economic development in China, and productivity, particularly in the US, growing faster than commonly forecast."
According to Skeoch, European retail investors have become net buyers of equities again. Meanwhile, the key theme driving investors in the Pacific Basin ex Japan market has been reflation. For Japan, Skeoch sees opportunities in both the telephony and the auto sector.
In the UK, businesses are beginning to invest again as the world economy enters a rare period of synchronised growth. Fixed interest remains an appropriate asset class for income seekers as part of a balanced portfolio.
Some concerns still hang over global markets. Elections in the US, Japan, India, South Korea and Taiwan could encourage market volatility, the possibility of volatility in foreign exchange markets, and the continuing threat of terrorism. However, Skeoch generally thinks that global markets should provide investors with reasonable returns during 2004 provided that they are willing to accept some risk.
The house view for Standard Life is to stay heavy on US, UK and Japanese equities. In the US, corporate newsflow continues to improve and Standard Life thinks the market should move higher again in the spring. For the UK, solid earnings growth and attractive valuations should continue to underpin equities, while in Japan the upturn in the global investment cycle is likely to be positive for equities. In addition, the rest of Asia should benefit from an improvement in world trade and relatively low valuations.
However, for European and emerging market equities, Standard Life"s position is neutral. On Europe, the view is that prospects for the region are slowly improving as the global recovery becomes more synchronised.
There has been an increase in corporate activity and restructuring efforts. But, although economic news is improving in Germany and France, it is also lagging in Italy and the rise in the euro has put exporters under pressure. For emerging markets, Standard Life feels the recent strong performance suggests limited upside in the short term.
In international bonds, Standard Life thinks the euro zone appears attractive as the euro appreciates, restraining inflationary pressures, while in the UK corporate bonds have shown improving credit quality as balance sheets strengthen.
Odds widened to 2/1
Our weekly heads-up for advisers
String of Neptune exits