Monthly Market Report - August 2017

1st August 2017

With commentary from David Stevenson

Talk to most investors in the big institutions at the moment and they’re obsessed with one word – normalisation. As in the expectation that inflation and interest rates will "normalise to long term trends”. The idea here is that we’ll see reflation and interest rates back above 3 or even 4% which would have huge implications for all investors, not least those in structured products. Suddenly cash would look a good deal more appealing. The chart below is from French bank Societe Generale and shows the long term real returns from investing in cash – increasing rates might radically improve the attractiveness of cash. Increased rates would also presumably increase market volatility.

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