As you are probably reading in the press, financial markets remain volatile, as investors worry about European sovereign debt, increased financial regulation, and slow global economic growth. Everyone is asking what this means and if this is a trend.
One encouraging note is that investors have differentiated among markets so that contagions are being contained. This is particularly important in the globalization of markets. Greece was a very different situation from many of the emerging markets countries that had their houses in order.
We believe that there is no doubt that some markets got carried away during the first quarter of 2010. The question now on investors’ minds is will there be a double dip recession. This terminology can be interpreted many different ways. Our position is that economic growth will be slower but positive over the next six to twelve months and that the temporary factors to stimulate growth during the first half of this year will be replaced by more sustainable factors such as increased business investment and favorable corporate profits. Although volatility will be with us for some time, we think there are both domestic and global opportunities, and have positioned portfolios to reflect this.
I would like to assure you that we have not wavered from the same principles that we adhered to during the difficult period of 2007 - 2009. These principles stood us in good stead: focusing on cash markets rather than derivatives, avoiding leverage, diversifying names, and being extremely sensitive to maintain liquidity. During the financial crisis, a number of institutions failed to focus on these elements.
My very best wishes to you and your family for the summer.
Warmest regards,
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