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Update: Ships Ahoy!

By beled | January 30, 2018

Extract from the December 2017 quarterly report:

With global growth set to reach 4% in 2018, the improved outlook to which we referred last quarter has become more entrenched and we like Investec’s quote: “All rooms sea-facing in 2018”. This implies demand for later cycle assets, commodities and emerging markets. Country specific policies such as US tax reform and infrastructural spending should enhance this supportive environment. The one potential major headwind remains higher interest rates through normalisation of monetary policies post the era of massive quantitative easing (QE). However all evidence is that with inflation showing no signs of life, US interest rates will rise slowly and reactively to good US data and therefore at this stage pose no threat to continued economic growth. The fundamentals for equity investments accordingly remain very positive. However valuations have become more expensive, e.g. US dividend yields have fallen, but are not yet in bubble territory such as 1999-2000 (see chart 1). On the balance of probabilities, the bull market remains intact.

Chart 1: Dividend yield of S&P 500 Index

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