Poor equity performance in the second quarter largely wiped out progress made in the first three months of the year as uncertainty once again pervaded global markets.
Investors lost their appetite for risk and moved their money to sectors perceived to be safe, such as healthcare and consumer staples, at the expense of energy, industrial and financial sectors.
Poor equity performance made it difficult for investors to find returns, with the MSCI World index falling by 1.4% in the second quarter and the MSCI Emerging Markets index sinking 3.6%. However, there were pockets of success. The German equity market grew nearly 5% and the US and UK performed well. According to a report by Willem Sels, UK head of investment strategy at HSBC Private Bank, this reflects the defensive position of the US and UK economies.
There are signs the equity market may be returning to strength, with investors recovering their risk appetite. The Greek government's decision to pass austerity measures restored investor confidence that a Greek default is not imminent. However, Sels' investment team remain cautious.
“Risk appetite remains fragile and there are many potential headwinds that may knock investor confidence over the coming months,” said the report. “However, we believe that a lot of the potential negatives are ‘in the price’, especially so for equities. Thus a period of range-trading seems to us the most likely scenario.”
©2011 funds europe