I realise how disconcerting it is to see share markets suddenly drop on 4 August. Potentially they may fall a further 2-3% over the next few days.

However I expect them to rally later, and when they do it will probably be just as quick and hence nigh on impossible to exercise any market timing buying into or selling out of holdings.

So for clients with existing investments in shares I am recommending that you hold your current position.

I think it would be the wrong decision to move out of shares now as you will be doing so at lower less attractive valuations and will miss out on the market recovery which I feel will come in the near future and thereafter further stockmarket growth over the next few years.

That all being said, where investments are held in cash, fixed interest and property, this represents a potential opportunity for a strategic asset allocation switch into shares. Such a switch will lead to an increase in exposure to risk but at times like this, you have to look for the opportunities as well.

Finally (crass as this statement may be presently) please remember
investments can go down as well as up.

If you would like to discuss your portfolio with us, please do not hesitate to get in touch on 01823 324432.

Robin's Round Up of Financial Data for August 2011

Redemption yields on short-dated gilts imply that interest rates will stay low at 0.5% or thereabouts well into 2012 as our fragile economy continues to recover from recession. Thereafter interest rates may start rising but not rapidly. Over the next 12 months or so we may see modest growth in the share market with continuing volatility. The outlook for rising unemployment and limitations on mortgage lending may however delay any recovery in the residential property market. RPI is at 5.00% and CPI 4.20%. Inflation may go higher still due to VAT increases and increasing fuel costs before perhaps declining again later this year. The average redemption yield for the two long dated gilts detailed below stands at 3.60%, a drop of 0.4% over the last month. This figure is at a very low level which is bad news for potential annuitants. This is due to the ongoing demand to secure liabilities such as final salary scheme closures and continuing low interest rates, against which gilts seem reasonable value and are currently in demand. We think long dated gilt yields will pick up over the next few years as interest rates rise and other asset classes become more favourable, however future final salary scheme closures and further quantitative easing may temper that. Fund manager house views favour UK and Overseas Fixed Interest, and investments in shares excluding Europe. An ongoing concern remains national debt, our Chancellor and finance ministers across Europe must continue to persuade investors debt is being brought under control.

Bank of England base rate of interest							0.50% pa
Short dated gilts (redemption yields)		3.25% Treasury Gilt 2011 redeeming 07-12-2011					0.47% pa
		9.00% Treasury Stock 2012 redeeming 06-08-2012					0.67% pa
		8.00% Treasury Stock 2013 redeeming 27-09-2013					0.72% pa
		5.00% Treasury Stock 2014 redeeming 07-09-2014					1.04% pa
Long dated gilts (red yields)		5.00% Treasury Stock 2025 redeeming 07-03-2025					3.47% pa
		4.25% Treasury Gilt 2027 redeeming 07-12-2027					3.73% pa
London Inter-Bank Offered Rate		LIBOR 1 MONTH					0.55% pa
		LIBOR 3 MONTHS					0.56% pa
		LIBOR 6 MONTHS					0.58% pa
		LIBOR 12 MONTHS					0.64% pa
Consumer Price Inflation (CPI)							4.20% pa
Retail Prices Index (RPI)							5.00% pa
National Savings & Investments		3 Yr Index-Linked Savings Certs offering RPI +					Not in issue
		5 Yr Index-Linked Savings Certs offering RPI +					0.50% pa
Exchange Rates		£1.00 buys:		€1.14			$1.63
Fund Managers – Current House Views on Different Asset Classes
Asset Class	Positive	Slightly Positive	Neutral		Slightly Negative	Negative		Total Views Offered
Cash						3		3
Property	1		2			1		4
UK Fixed Interest	1	2	1			1		5
Overseas Fixed Interest	2		2		1			5
UK shares	3	1	1					5
European shares	1				1	3		5
American shares	2		2			1		5
Japanese shares	1	1	3					5
Pacific (ex Japan) shares	2		2			1		5

Data gathered on 1 August 2011. All figures given to 2 decimal places. Participating fund managers: Standard Life, Aegon, F&C, Threadneedle, UBS. DISCLAIMER Please note, whilst every effort has been made to ensure the information contained in this document is correct, sometimes the information given to us by third parties is inaccurate. We cannot therefore be held responsible for the accuracy of this information and it should not be relied upon for making any decisions.