Monthly Market Report - August 2014
1st August 2014With commentary from David Stevenson
As we head into the long grass of the summer holidays, the markets are becoming even quieter than normal, bar the odd panic about Portuguese banks - volumes have crashed back and even M&A activity is beginning to dry up! I tend not to take too much notice of market moves in July and early August - with the exception of the Q2 reporting round - and use the time instead to focus on more off the beaten track statistics.
On that theme, I find that numbers looking at fund flows are especially useful - they tell us how retail investors are reacting to the ebb and flow of markets. Recent numbers from the IMA (the main body over seeing unit trusts) is, I think, particularly revealing. In general terms, I think it confirms that investors are still bullish about equities, and that they've not
turned overly bearish.
Inflows into retail funds are down a tad after the hype of the ISA season, but the IMA numbers suggest that inflows are holding up at the £2bn plus level on a monthly basis. But dig a little deeper into the numbers and we discover some interesting trends - demand for property funds (with their juicy income) is strong as is buying of multi asset funds. Global equity funds are also holding up well although there has been fading of interest in UK equity funds, with small caps especially badly hit.
But perhaps the most interesting numbers come from bond funds where outflows have now reversed and money is flowing back into strategic bond funds and emerging markets bond funds. In terms of structured products I'd suggest this hints at a more defensive quality to investors' outlook, with many clients still fundamentally optimistic about the markets but also looking for some 'insurance' in case markets do take a tumble.
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