Global equities have performed well in the year to date fuelled by synchronised global economic growth and comparatively strong earnings data. This has offset the political risks created by various elections and provocative rhetoric from North Korea. The FTSE World index has gained 7.98% to the end of September. The FTSE 100 started the year at 7,142 and is now at 7,458 having finished August at 7,438.
We remain cautious though. In our view, equity and bond markets are overvalued and face a number of risks. At the macro level risks comprise debt levels in the developed economies and tightening monetary policy. We are also concerned about the influence of passive investment vehicles on equity markets and the inter-related issue of a concentrated number of large stocks leading the market, especially in the US.