18 December, 2008
Jeremy Beckwith, Kleinwort Benson’s Chief Investment Officer comments on the likely performance of the financial markets in 2009.
"As the year begins financial security will be the number one priority for investors. The financial markets in 2009 are expected to be flat to gently higher while the economies of the major nations catch up with the dramatic market movements that have taken place in recent months.
"Investors will not see the returns that they are used to and for this lower return they will demand absolute security of their initial investments. For those that are in a position to take risk, bargains can be found in the riskier asset classes which remain cheaply priced on a long term view.
- Equities and corporate credit are attractively valued. Yields on these assets are high and the markets are already discounting a very serious recession.
- There will be few buyers of property next year and this asset class will only be attractive to long term investors with little prospect of any great increases in value.
- If the hedge fund industry is not deluged by a wave of redemptions following the Madoff scandal in the first quarter of 2009, there will be opportunities for investors due to the current dislocation and lack of liquidity in many financial markets.
- Commodities should become attractive later in the year as the emerging world economies recover quicker than Western economies, stimulating a greater demand for the asset class.
- Structured products that take advantage of current levels of implied volatility to offer a high income whilst limiting downside risk will become increasingly popular, particularly for those investors who are suffering as a result of falling interest rates.
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