Please find this month’s Market Commentary newsletter which contains our view on the stock market based upon fundamental and technical analysis along with some recommended investments for the current market.
Last month we reversed our outright underweight position on the stock market and reverted to equalweight, noting that July was not a bad month historically for equities. We forecast that we did not see the market moving much either way.
As it happens, the market fell just 13 points (0.2%) with the market pretty much range bound. Our four recommendations (Carillion +6.4%, GlaxoSmithKline -8.8%, HSBC +6.5% and Vodafone +1%) were let down by Glaxo but still managed to put in a credible overall performance of +1.3%.
It is interesting to note that the VIX (the level of implied volatility in the stock market), at 13%, is some 31.5% below its historic average of 19%. Whilst some would call that a classic sign of investor complacency, research from Deutsche Bank has found this not to be the case. Indeed, volatility has historically followed a clear cycle: peaking near recessions, falling gradually during recoveries and bottoming mid to late cycle as un-employment falls below the natural rate and the market starts to price in FED tightening. The current volatility cycle is indeed similar to previous periods in both duration and magnitude and is forecast to turn higher by the summer of 2015.