Equity markets enjoy continued momentum

Despite vast areas of the UK falling victim to last week's blizzard conditions, one thing that wasn't adversely affected was the stock market. After the strong finish to 2012 resulted in most investors seeing double digit returns, many have been surprised to see this momentum carry on into the first few weeks of the new year. The FTSE 100 index is up 4% year to date and in the US, the S&P 500 index climbed to its highest level since the start of the financial crisis five years ago.

However, the increased demand for equities appears, so far, to be confined to institutional investors. The latest study by Bank of America Merrill Lynch suggests 50% of investment managers are looking to move out of bonds and into equities over 2013. Professional investors are holding their lowest cash levels since early 2011, suggesting they don't want to be left behind as markets continue to rise.

Also in this week's bulletin...
  • Last week saw the failure of two more familiar High Street names as both HMV and Blockbuster were placed into administration, potentially leading to the loss of up to 10,000 jobs, as many commentators noted the failure of all three to adapt to technology and the subsequent impact on consumer behaviour.
  • In the latest shake-up of the pensions system, most commentators approved of the drive towards greater simplicity as the Government announced a move to a new flat rate state pension from April 2017.
  • Whilst doubts still persist about the sustainability of China's rebound, news that their economy grew by 7.9% relative to 12 months earlier does suggest that the new political leaders managed to avoid the hard landing that has concerned the West for the last year or so.

View this week's Market Bulletin (PDF), which contains thoughts and opinions of St. James's Place and our range of investment managers on the key issues affecting investors.

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