Investment Outlook for Q4 2013 (1 October to 31 December 2013)

Looking ahead to the final quarter of the year, we expect to see continued progress in the markets, building on the consolidation of the last three months. As investor confidence returns, we should see demand increase for high quality UK stocks and selected funds, particularly those paying above average dividends by strong profitable companies.

With a slow recovery still underway in Europe and central banks providing forward guidance, we hope to see continued support for markets as required.

We will keep a close eye on events in the US, not least the recent government shutdown which, depending on how long it lasts, could have a serious negative impact on GDP for the fourth quarter. There is a more worrying concern too over the US reaching its debt ceiling which must be raised in the coming weeks in order to avoid defaulting on debt repayments to its Asian creditors.

The timing and speed of the tapering of QE, expected to take place in the US sometime towards the end of the year remains a key driver for markets, although much of this has already been discounted by markets.

Despite the inevitable volatility, we think that global equity markets represent fair value over the medium term and there are a number of attractive buying opportunities.

Our Approach

Whilst a period of growth may be on the horizon, the road to recovery is likely to be bumpy; lessons from the past have shown that markets will remain sensitive. Therefore, our approach with regard to the management of portfolios is to remain vigilant of developments around the globe, such as the US debt ceiling, the Eurozone concerns, and continued political instability in parts of the Middle East.

We continue to favour equities, which should benefit as the economic recovery takes hold, rather than bonds, which typically run the risk of capital as the economic cycle turns towards growth.

Interest rates are likely to remain lower than inflation after tax for the foreseeable future, so other than as a contingency fund, cash is unattractive.

Our approach will be to help our clients benefit from equity returns and target sustainable dividends, whilst continuing with our diligent research and analysis to highlight attractive investment opportunities and mitigate risk as far as possible.

[Matthew Clark, Seabrook Clark Ltd, 4 October 2013]

Please note, our Investment Commentary is our view of markets and does not constitute investment advice. Past performance is not necessarily an indication of future returns; the value of investments and any income from them is not guaranteed and can fall as well as rise. If you would like investment advice on your individual circumstances, please do not hesitate to get in touch.

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