Inflation on the prowl in 2011

Pat O'Sullivan
February 4th, 2011
by

Inflation on the prowl in 2011

Below please find a summary of our views – please click on link for full article.

Inflation on the prowl in 2011

  • Equities should perform reasonably well in 2011, but will face  a number of headwinds – in general, we believe quality large  cap companies look attractively valued, especially on a  comparative basis.
  • We would be cautious about long-term government bond markets in the core Euro area and in the U.S. and the U.K. this year. On the other hand, Irish 10-year government bond yields at around 9% look a tempting proposition but do carry a higher risk of default.
  •  Deposit rates will likely remain broadly unchanged in 2011 but the actual rates on offer will vary from institution to institution.
  • Commodities should continue to perform strongly over the next 12 months, underpinned by continued strong emerging market demand and easy policy conditions in the West.
  • Irish commercial property values are expected to continue to drift lower due to weakening rental values (yields should remain broadly stable). However, the market appears to be close to its cyclical bottom and looks attractively valued. U.K. and core Euro area markets will continue to see strong investor interest for prime secure properties but non prime property values will remain under pressure.
  •  In general, investors and savers need to guard against the risk of rising inflation and a greater allocation to real financial assets is warranted.
  •  There are a number of obvious risks facing the markets in 2011 and these include Higher inflation, sovereign risk contagion and political flare-ups in Asia, especially the North-South Korea stand-off.

Link to full report here

Pat O'Sullivan
February 4th, 2011
by

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