We have entered the quiet period of summer when the markets often lack direction. We expect that once this period is over, the stockmarkets of the UK and US are poised to head higher.  The mid-cap Top UK 250 Companies index continues to do substantially better than the Top UK 100 Companies in the UK, and the Nasdaq100 index that includes technology stock continues to outperform, hitting a new peak on 31 July.

The recent UK manufacturing and industrial output numbers are better than forecast, providing more evidence that the economic recovery is strengthening.  There are signs that growth is also returning to businesses in the Eurozone.

The US stockmarket, as measured by the S&P500, is up nearly 20% this year, touching a record high at the beginning of August.  The major central banks remain accommodative, with interest rates on hold and no new guidance from the Bank of England or the European Central Bank.

Overall, we continue to believe that the bull market in equities has further to go, and we think commercial property is beginning to benefit from the recovery.  The fear of rising interest rates has receded somewhat, but we remain cautious about fixed interest investments.  The yield on 10 year gilts is now 2.5%, which compares with a year low of 1.4%.  These rates are still low bearing in mind that UK inflation is running at 2.9% (CPI June 2013).

As always, it is important to have a balanced portfolio invested in all the major asset classes, in line with your objectives and attitude to investment risk.  Any changes in asset allocation should be gradual, because of the difficulty with precisely timing the markets.

Risk warnings
This document has been prepared based on our understanding of current UK law and HM Revenue and Customs practice, both of which may be the subject of change in the future. The opinions expressed herein are those of Cantab Asset Management Ltd and should not be construed as investment advice. Cantab Asset Management Ltd is authorised and regulated by the Financial Conduct Authority. As with all equity-based and bond-based investments, the value and the income therefrom can fall as well as rise and you may not get back all the money that you invested. The value of overseas securities will be influenced by the exchange rate used to convert these to sterling. Investments in stocks and shares should therefore be viewed as a medium to long-term investment. Past performance is not a guide to the future. It is important to note that in selecting ESG investments, a screening out process has taken place which eliminates many investments potentially providing good financial returns. By reducing the universe of possible investments, the investment performance of ESG portfolios might be less than that potentially produced by selecting from the larger unscreened universe.