Following on from my more detailed ‘Austyn’s Insight’ from last month, many of the themes I mentioned are still current. We have a world in recovery getting used to the prospect of rising interest rates, balanced against a backdrop of slowing manufacturing in China, which has upset emerging markets. The push and pull of these events effect’s us all, because it signals when the US and UK will start raising interest rates, and stock markets like to know these things.

The latest is that US employment figures are better than expected, and that the recovery is filtering down to employees, with average US earnings on the up. Whilst there are still concerns over the international environment, this now increases the likelihood of a US rate rise soon.

I would expect stock markets to wobble a bit when this happens simply because it’s something new. We have not had a US interest rate rise in almost ten years! It may also decrease the value of corporate bonds which is why we have reduced these holdings. But thinking beyond this, a broader US led recovery is what we want because it helps our own stock market improve.

So the enclosed changes reflect the above and where we are looking to diversify to help manage risk as we go through this transition.

This is an extract from a client newsletter ‘Portfolio Realignments and Observations’ with instructions to bolster defensive positions

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