Where to Invest Now?Written on April 1, 2015 by Kirk Rice LLP
Financial Services QuestionsThe Question:
I have been investing in companies that I know in my industry (pharmaceuticals) and about 2 years ago put some money into oil companies I thought would benefit from UK shale oil. I think I should move out of the oil companies as it may be a long time returning to my original stake. What would you suggest I invest in now?
Kirk Rice LLP answers:
Let’s examine the current themes and the way investment decisions could be approached. Perhaps most importantly as we look into 2015, we have a global deflation scare. Recent Consumer Prices Index (CPI) levels were 1.7% in the US and 1.3% in the UK and in the Eurozone just 0.4%. That is the real worry, particularly as this includes five peripheral Eurozone economies that are now in deflation (Greece, Spain, Italy, Slovenia and Slovakia). Surely with the new Central Bank policy of stimulus there will be growth in Eurozone companies, perhaps following the pattern of growth shown since 2009 in the US and UK.
China, for so long a headline growth country, is under scrutiny as its economy slows. The impact is felt around the world in everything from powdered milk to cement, steel and consumer goods. Another global factor is the surplus in oil supply and it is expected to last for several years. It is expected to move more economic power to consumers. The concern is that people will save more, rather than fuel their economy. Perhaps manufacturing in the UK will grow as a result of the lower power costs that could follow. As long as they can match or create demand from the consumers with spending power. Some companies have a habit of creating demand for products we did not know we needed. You might think of the US, which still attracts a mobile workforce at all skill levels and has a strong track record of enabling start-up companies to thrive. If the US thrives on low commodity prices and possibly higher interest rates could this derail the long awaited Eurozone recovery?
To determine a recommendation for you I would need to understand the impact on your lifestyle of any loss as well as your ultimate goal. Not all investors need to take as much risk as others to achieve their goals. We follow a long term strategy about where in the world to invest and utilise multiple investment funds to access the sectors needed. We regularly review and make changes to changing economic outlooks and data. Investment fund clients benefit from the Financial Services Compensation Scheme too (up to £50,000 in the event a fund company goes bust).
If you would like more advice regarding this issue or any other financial services matter, please contact us.
If you would like to receive Kirk Rice’s Financial Services Questions regularly by email, simply email info@kirkrice.co.uk stating Financial Services Questions in the subject heading and we will add you to our distribution list.
Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.
Moving out of cash and safe haven investments in search of higher returns will involve accepting a greater risk of capital loss. Past performance is not a guide to future performance. The value of your investment and the income from it will vary and the initial investment amount cannot be guaranteed.
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