The 9 August 2017 was regarded by many as the 10 year anniversary of the global financial crisis. The European Central Bank (ECB) and the US Federal Reserve (Fed) ploughed c. £45 billion into financial markets that day as the credit crunch began. Astonishingly, the UK base rate on that day stood at 5.75%. Since the 5 March 2009, it has only ever been 0.50% or lower.
With less dovish tones starting to emanate from central banks globally, relatively high valuations across equities and a cooling off in the London property market, it is safe to say that we are not spoilt for choice in terms of attractive opportunities. Following a somewhat volatile second quarter, how are we positioned for Q3?
Although not widely discussed, 2015’s EU Bank Recovery and Resolution Directive (BRRD) has had a big impact on how institutions manage their cash balances. As a result, institutions are hunting for secure vehicles for their cash deposits. The CF Canlife Sterling Liquidity Fund aims to meet this demand, with the aim of delivering an enhanced return relative to short-term bank deposits.
Up until mid-June, UK gilts had performed robustly from a total return perspective in 2017, as 10 year yields edged down from 1.24% at the start of the year to hit 0.93% on the 14 June. This translated into a gain of 2.84% from the FTSE Gilts All Stocks Index over the same period. However, there has been a change in tone from developed market central banks of late.
The second quarter of 2017 was marked by central banks’ communication returning as the main driver of performance of financial markets. The US Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of Canada (BoC) guided investors towards an intention to normalise their monetary policies by reaffirming their confidence that the current global recovery will bring inflation near their 2% target.