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‘Correction is a lesson to complacent investors’

F&C stewardship growth and income manager Ted Scott says the recent correction in UK markets should be seen as a warning for investors that stockmarkets will not go up in a straight line for ever.

Scott says since the last correction in May and June 2006, investors have become increasingly overconfident in their market positions and that the recent problems in China and the US have had a positive effect in that they may have calmed investor exuberance.

Scott believes the biggest factor for this change in the market has been the reassessment of risk.

He says: “This has been highlighted first and foremost by the reversal in the yen carry trade, which has seen investors buying up yen to lock in profit, causing the value of the currency to shoot up in a couple of days.”

Scottpoints out that the Vix index, a key measure for market volatility, had risen in recent weeks to levels that were in correlation to the ones before the correction last May.

He says: “The recent sell-off has bought home to the investment community that risk is currently quite high and that the financial system can be very precarious.

“If attitude to risk starts to change, credit spreads will widen and it will become more difficult to borrow money.

“The bubble in takeover activity could be at bursting point and going forwards investors should be reasonably cautious and invest more money with companies with strong fundamentals, be it strong growth or cashflow.

“Those companies whose valuations have risen on the back of takeover speculation are looking increasingly more vulnerable.”


Advocate is picked for orphan cash

Prudential has set the ball rolling on reattribution of the £9bn inherited estate in its with-profits fund by nominating a policyholder advocate.It has nominated Peter Bloxham for the role. He recently retired as a partner at law firm Freshfields Bruckhaus Deringer and has insurance experience.Under rules introduced by the FSA in 2005, a policyholder advocate […]

BUDGET: 2 per cent cut in income tax

Chancellor Gordon Brown in a surprise announcement cut basic rate income tax from 22 per cent to 20 per cent from next year. Conservative leader David Cameron hit back at the Chancellor saying he has taken one tax down but “put 99 taxes up”.From April 2008 the basic rate income tax will be cut to […]

An echoing report

I do not know whether any of you have noticed but the world of personal finance has a way of creating amazing yin and yang-style symmetries.

Janet and Jeremy Davies

The married couple who run Symponia wanted to set up a network to help advise the families of people going into nursing homes and have widened widened their reach to cover financial planning for all people over 65. Interview by Nicola York.

Five reasons for optimism in India

By Kunal Desai, Head of Indian Equities at Neptune Investment Management Following the MSCI India Index’s 26.4 per cent return in 2014, stemming from a 7.3 per cent rise in GDP, investors have recently become increasingly concerned about India’s future growth potential. What has happened to India’s reform agenda and are there any signs of […]


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