Outlook - as at January 2013

Market

Positives

Negatives

Outlook

View

Positive +

Neutral =

Negative -

UK equities

UK banks are working through their problems

Relative value to other asset classes

Western economic growth is weak

Markets are less cheap than twelve months ago

Equities offer fair value

Political uncertainty in both US and euro zone

=/+

UK bonds

Gilts a safe haven from continuing concerns about the eurozone and US "Fiscal Cliff"

Inflation continuing to fall

Short term rates likely to stay low for some time

Heavy gilt issues to fund large government deficit

Gilt yields at historic lows

More optimism over global economic situation

Investors looking to rotate away from safe havens

UK Gilts to lose ground

-

European equities

ECB plan allowing government and corporate refinancing in periphery

Market valuations are attractive relative to history and international peers

High debt levels remain the key problem for Southern Europe

Economic weakness is spreading across to core Europe

ECB action combined with cheap valuations gives upside potential

+

US equities

Corporate sector is still very strong

Fed remains aggressive

Cheap shale gas helpful

Growth rate is contracting

High unemployment also a concern

Some fiscal uncertainties remain

Growth likely to lag

Market will perform less well than elsewhere

-

Asia Pacific ex Japan equities

Strong corporate balance sheets

Region has better economic fundamentals than developed economies

Chinese economy bottomed in Q3

Economic growth to slow moderately

No new Chinese policies until March 2013

Investor sentiment affected by external events

Strong fund flows into the region likely to continue

+

Japanese equities

Stronger corporate and consumer balance sheets than other economies

Valuations remain in attractive territory

Further monetary easing likely

Earnings at exporters remain dependent on a continued global economic recovery, the health of which remains a risk

Slower global growth could threaten the domestic recovery

Policy easing looks increasingly likely

+

UK commercial property

Stable income flows help total returns

UK still viewed as a corporate safe haven for investment

Continuing polarisation of prime and secondary markets

Consumer and business confidence remains at a low ebb

Some capital loss in first half of the year followed by stabilisation

Higher level of transaction volumes as the year progresses

=/-

Please note that past performance is not a guide for the future. The value of units can fall as well as rise and currency fluctuations may also affect performance.