Market Commentary - Spring 2009 - 2009-03-31



The first quarter of the year continued the trend of significant volatility in major investment markets that was so apparent at the end of 2008. However, whilst in December 2008 this volatility was represented by significant rises in equity markets, the beginning of this quarter showed markets turn southerly. This is reflected in the year to date returns which show that despite a recovery in March, most major equity markets are showing falls in the region of -10% over the 3 month period. However from the lows in mid-March markets have improved strongly, for example with the US market jumping more than 20% in just two weeks. This to a certain extent represents that some of the overwhelming fear from earlier in the quarter has lifted and markets are now pricing in a recession and the avoidance of a depression.

We feel it is a little early to say whether this is the start of a more sustained recovery, or merely a bear market rally which is providing temporary respite for investors. Consumers are in general still feeling somewhat better than might have been expected at this stage of an economic contraction, helped by their lower mortgage and energy costs. However unemployment and housing prices continue to deteriorate, although these are lagging indicators which do not necessarily represent the up to date economic backdrop and therefore will only reflect better news long after the economic cycle has actually turned.

We continue to feel that current market valuations represent decent long-term opportunities for investors, who will be rewarded for participating in the volatility in markets which will no doubt continue. For investors already in the market, our advice in general would therefore be to maintain exposure, whilst ensuring that your holdings are best positioned to benefit from the current climate. For new investors, particularly those looking to reinvest poorly returning cash deposits, we would suggest phasing monies into markets in order to somewhat negate the effects of any short-term volatility on your initial investments.

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.