Market Commentary - Year End 2007 - 2008-01-01



The economic picture changed dramatically over the course of 2007. Whereas the year started with a backdrop of strong global growth, it ends with worries over inflation and a recession which threatens to commence in the US and boil over to other nations. The turning point seems to be the sub-prime worries coming to the for in the summer, which led to a contraction in available credit to both consumers and businesses. As a result, growth forecasts are being scaled back, and consumer confidence appears weaker. Inflation, also seems to be a growing concern, driven by high demand for energy, commodities and foodstuffs in Asia (particularly China). We feel that this uncertain backdrop will lead to greater periods of volatility in markets, which will at times cause concern for investors, but also present opportunities. At times like these, the fundamentals of having a well diversified portfolio, and investing for the long-term can be paramount.

In the last quarter, we witnessed widely varying returns from different areas of the market. Mid-sized and smaller companies in the UK, continued to show significant weakness compared to their larger blue-chip peers. Commercial Property also gave up further ground, and certain funds investing in this sector have started to impose restrictions on investors looking to sell their positions. Conversely, government bonds continued to rally, given the nervousness towards other major investment sectors.

Opinions expressed represent the views of Stan Gaskin Ltd at the time of writing, They are subject to change and should not be interpreted as specific advice. Please discuss your personal circumstances with an adviser prior to making any investment decision.