Investment Insights Q4 2017

Investors today are paying a relatively high price for domestically focused UK companies compared with their multinational peers, which seems counter-intuitive given Brexit uncertainty. For investors, this divergence is creating both opportunities and challenges, which are the focus of our lead article “Digging below the surface of UK indices".

Investors today are paying a relatively high price for the domestically focused FTSE 250 compared with its larger multinational peers in the FTSE 100. This may seem counter-intuitive given Brexit uncertainty. As our lead article explains, this divergence is creating both opportunities and challenges for investors.

When geopolitical tensions rise, investors often turn to gold and prices have increased recently following concerns about North Korea’s nuclear programme. Gold also offers important diversification and hedging properties against uncertain monetary policy in multi-asset portfolios, as we explain on page 5.

Following a series of business-friendly election results, Europe’s economy is picking up speed, and its equity markets have been in fashion with investors this year. However, their popularity may be waning as valuations become less attractive and signs emerge that economic growth may have peaked. Find out more on page 6.

On page 8 we explore how attractive infrastructure investments are becoming more difficult to find. Amid heavy demand from investors desperate to earn a decent return in a world of ultra-low interest rates, it is getting harder for managers to source enough projects with good return potential. We believe more attractive opportunities from diversifying assets lie elsewhere.

Lastly, levels of consumer debt in the UK are back where they were before the 2008 financial crisis and there are signs of stress in the US car loan market. This has fuelled concerns that the global economy is on course for another crash, but we believe the situation is very different this time and unlikely to spiral out of control, as we explain on page 9.

Read the latest edition of Investment Insights.

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