Adviser points to stability in China
Investors ‘are right to ignore falling oil price’
The comments from Nigel Green, founder and chief executive of deVere Group, which has $10bn under advice, came after the collapse of the summit in Doha involving the world’s major oil producers which was aimed at capping output.
The price rebounded today as investors focused on a stronger than expected economy in China to help boost demand. Brent crude was at $43.25 a barrel this morning, 34 cents above the previous close. US West Texas Intermediate futures were up 33 cents at $40.11 a barrel.
Mr Green said: “Oil prices have tanked after OPEC, an organisation that is plagued by internal differences amongst its main players, has been unable to get a deal that will stem production.
“However, it appears that global investors have largely shrugged off plummeting prices and have a generally positive outlook – and they are, I believe, right to do so.”
He continues: “Stock markets have taken the news on the chin. It would seem that the strong correlation between global stocks and the oil prices, which was a hallmark of the downturn in markets earlier this year, isn’t now asserting itself.
“This could perhaps be because investors are focusing on the continued positive flow of US economic data, and some stability taking hold in the Chinese economy. And lower energy prices are, of course, good for the non-energy related sectors on global stock markets.”
Mr Green concludes: “As ever, the best way for investors to grow and maximise their wealth in the ever-shifting markets is to mitigate risks and to capitalise on the upsides by having a well-balanced portfolio that’s appropriately diversified across asset classes, sectors and regions.”
DeVere Group’s International Investment Strategist, Tom Elliott, said: “Whilst there are certainly risks, and there always are, I believe the second quarter of 2016 will be considerably less volatile than the first.
“There are three reasons for this. First, the US Federal Reserve is far more emollient in its forecasts for rate hikes than it was three months ago, while recent economic data suggests continuing stable economic growth in America.
“Second, the much-forecasted hard landing for the Chinese economy has failed to materialise. At 6.5% the economy is still growing at a decent clip.
“Third, a major source of weakness on financial markets in recent years has been the resources sector. But this is going through a period of self-healing. Certainly, it remains very susceptible to news flow from China regarding potential demand growth.
“But the over-supply issues that bedevil companies in the resources sectors are being addressed through the axing of new energy and mining projects, and closing of uneconomic operations. Companies are bearing down on operating costs, and less generous but more sustainable dividend policies.”