Equity markets worldwide continued their move upwards over the quarter but opportunities still exist and there’s no obvious trigger for a sell-off.

We continue to have a positive outlook for global equity markets based on the view that global growth will enjoy a modest boost from economic policies in the US and UK.

In global terms, we prefer European and Japanese equities, which are inexpensive relative to other developed markets. Europe is at an earlier stage in the economic cycle than the US, and growth and inflation are now picking up. We saw strong earnings from European companies last quarter, which boosted stock prices, and believe that the latest earnings season will be similarly positive.

Performance of our Japanese equity holdings in the shorter term depends very much on the strength of the yen. While local currency returns have been solid, they have looked less impressive for sterling and dollar investors. In the longer term, though, on top of the attractive valuations, Japanese companies typically have strong balance sheets and are supported by an improving local economy.

Some markets are highly valued, especially the US, and investors shouldn’t be alarmed by short-term market falls on the back of profit taking as markets continue to rise. At present there is no obvious trigger for a major correction – bear markets are frequently associated with a recession in the US, but data continues to show a strong US economy.

We are therefore sticking with our slight preference for equities over bonds, but maintain a diversified portfolio, in line with our investment principles, to protect Coutts clients against any fall in equity values.