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Weekly Investment Update

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Summary

Monique Wong discusses the challenge central banks face as they look to unwind ultra-easy monetary conditions

3 min read

Monique Wong covers recent developments in the markets and at Coutts, the challenges involved with unwinding ultra-easy monetary policy and the benefits of alternative assets in our portfolios.

“Since the financial crisis gilts have become extremely expensive, and more risky, and this is where the alternative portfolio comes in. ”
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Our key messages this week are:

 

Summertime and the markets were easy

Market conditions were benign throughout the summer.

Across July and August, developed equity markets largely moved sideways while those in emerging markets rose.

 

The big challenge for central banks

We are experiencing economic growth in all major regions, albeit with a muted pick-up in inflation.

This presents a significant challenge to the central banks as they look to unwind ultra-easy monetary conditions introduced following the global financial crisis.

While we expect some increased volatility in asset markets as banks sell off the assets they hold, this should be seen in light of the very low levels of volatility we have seen recently. We don’t believe we’ll see volatility rise to significant levels relative to longer-term trends.

 

Why we prefer alternative assets to gilts

One way that we have positioned our portfolios to deal with this volatility is through our preference for alternative assets over gilts.

Gilts provide portfolio diversification, especially when equity markets are stressed, but since the financial crisis they have become extremely expensive and more risky.

This is where alternative assets come into play. Our alternative portfolio is made up of investments which exhibit a low correlation with the equity and fixed income markets.

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With unstinting focus on client objectives and capital preservation, Coutts Investments provide high-touch investment expertise that centres on diversified solutions and a service-led approach to portfolio management. Our investment process is as disciplined as it is creative – ensuring tailored solutions with robust results.

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