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No holding back the tide - but it's yet to come in.


THIS industry is (in)famous for airbrushing history.

It's rare to meet fund managers who have made poor decisions or stockbrokers who have recommended bad shares, but last week Warren Buffett, coming from a position of strength, it's true, did issue a mea culpa on his purchase of Tesco shares, and that was most refreshing.

When I was a stockbroker I used to list my ten worst recommendations of the year so I could learn why they were so bad and hopefully not repeat them. I promise to undertake a similar exercise in December - I just hope the list is not too long!

While I don't wish to assume any regal characteristics, it's worth recalling the story of King Canute. It is widely believed that his attempt to hold back the tide was a hubristic failure to overcome the forces of nature, but historians generally agree that he was in fact trying to prove to his subjects that the Earth was ruled by a far greater power than him. I have to acknowledge that market forces are far more powerful than any individual, and one needs to bear that in mind constantly.

A year ago there was much concern that very loose monetary policy would lead to economies "catching fire" and that central banks would be forced into a rapid U-turn, raising rates aggressively.

There was also fear that the Federal Reserve's eventual tapering of quantitative easing would create an insurmountable headwind for financial assets.

Our view through all of this was that interest rates would remain lower for longer and that tapering would be manageable, and 12 months later we're still of that opinion.

A year ago the forward contract for UK interest rates in December 2014 suggested that they would be close to one per cent, and here we are at 0.5 per cent and still no consensus as to when exactly the first rise will come, next month or the second quarter of 2015.

I remain firmly in the latter camp.

John Wyn-Evans is head of investment strategy at Investec Wealth & Investment Sponsored column

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Publication:The Birmingham Post (England)
Date:Oct 9, 2014
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