For investors it’s probably not unfair to suggest that danger seems to lurk around every corner. Starting on a positive note though, China’s recent measures aimed at reviving its sluggish economy have proved a significant catalyst for a region that has appeared increasingly uninvestable to many investors due to its strained relations with the West. Monetary stimulus without significant fiscal stimulus might only have a moderate impact though so whether the recent rally can be maintained is yet to be seen, but a rebound in China could certainly be positive in terms of reinvigorating supply chains and boosting markets worldwide.
Closer to home, the new Labour government’s bleak outlook appears to have acted as a bit of a brake to the renewed enthusiasm we’d recently seen for UK shares and according to data published by Calastone last week, over £600m was withdrawn during September from funds that invest in UK companies. Speculation suggests this is due to fears that the Chancellor could hike the rate of capital gains tax, and that investors are taking gains ahead of any announcement.
It is also impossible to ignore events in the Middle East where aside from the humanitarian crisis, the cost of disruption to Iran’s oil industry could have severe implications for inflation. The price of oil has been falling since the spring, hovering around 3-year lows earlier in September, but has now risen by almost 10% in recent weeks as the threat of an Israeli attack on the operations of the world’s seventh largest oil exporter increases.
It all feels a little uncertain at the moment, but this isn’t unusual in stock markets. I see no particular reason for the mood to change in the short term and suspect investors will remain in a ‘wait and see’ mode before making any longer-term investment decisions.
