Active investment commentary & analysis

Opportunities to buy at a significant discount?

Since the end of September, investor sentiment has clearly deteriorated and the market has suffered a significant pullback. Numerous explanations have for this been offered: higher US treasury yields and concerns over the Fed’s interest rate path; slowing Chinese and European growth; the market waking up to the reality of trade wars; and Brexit.

Economic growth is slowing but some perspective is needed. The US economy continues to grow strongly, with corporate and consumer readings at or near historic highs. In the UK, wage and employment data remains robust. European growth has slowed but is largely down to temporary factors including a change in automotive emission standards that impacted industrial production. The Chinese government continues to have tools at its disposal to attempt to boost growth if required. The significant imbalances in the real economy or financial sector that typically emerge at the end of the cycle are not apparent. Brexit creates uncertainty but many domestic stocks already reflect this. The indiscriminate nature of the recent market sell-off can afford opportunities to buy stocks at a significant discount to their intrinsic value.