There are a number of matters of concern, particularly the fear of an end to quantitative easing in the US, and the situation in Syria.  Despite Bank of England Governor Mark Carney providing guidance about future interest rates remaining low, the yield of 10-year gilts has increased to 2.9% from a low of 1.6% earlier in the year.  Something similar has occurred in the US, but eventually it will be seen as good news because it reflects improving economic conditions.

The purchasing manager indices (PMI) are widely used as a measure of economic activity and these reached relatively high levels in the US, the UK and even in the Eurozone in July.  There is a sustained expansion of business confidence in Germany, helped by a more buoyant US. There are other signs of improving conditions globally as well, such as the increase in passenger air traffic which was up 6% over the year to June.

The situation in Syria is very worrying, but it is more likely that the current situation will be a cause of volatility rather than a reversal of fortunes in the economic recovery.

Overall, we continue to believe that the bull market in equities has further to go, because the earnings of many companies are growing well and valuations look reasonable, and even cheap in Asia.  Commodities are showing signs of recovering as growth returns in China.

There is a long way to go with the economic recovery.  We should become concerned when fear gives way to euphoria, but we are nowhere near to that point!

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.