Market Musings December 2009

We wish you a Merry Christmas and a Prosperous New Year

A mixed month in November

November was a very stock-specific month

Apart from Inmarsat, a mobile telecoms company, at no 9 the top 11 FTSE100 shares over the month were commodity-related, with gains of between 13% and 30%. Meanwhile, many financials had a poor month, led by a fall of nearly 21% by RBS. If you strip out THE 2% net contribution these mining stocks and RBS made to the FTSE100 it only nudges ahead less than one percent over the month

Investors in Japan were rewarded by a strong performance from the Yen, only to have the currency gains more than wiped out by a nearly 7% fall in the Japanese stock market (Nikkei 225), leaving the strongest winner being the US, with both market and currency gains for the month. The prize for top volatility for the month went to undated gilts!

So what can we deduce from this?

Firstly, that the bulls are not having it all their own way.

Secondly, that there is a lot of indecision - high gilt volatility being a big clue; daily price moves of +/- 8% are symptomatic of this

Thirdly, commodities are gaining momentum.

With such a high level of nervousness this is probably not a good time to be making "spur of the moment" investment decisions; it is, however, a good time to review any recent gains and carefully consider any income or capital requirements you may have over the coming months - not forgetting, however, to be mindful of the current volatility and to try not to lose out badly on any switches undertaken. As suggested last month, we would expect to see some increase in volatility in the short term but this looks like continuing to be a good time to accumulate equities for the longer term.

Model Portfolios

Along with markets, most fund returns were positive but fairly flat, although overseas funds, generally, were up around 1.5% to 4%. Looking forward, we heard an interesting comment from Graham French of M&G, one of the portfolios' fund managers, "If China makes it, the price will fall; if Chine needs it, the price will rise." This probably sums up the coming decade in nice, simple terms and is worth taking on board.

By the time you read this, we will have had the Pre-Budget Report, which is likely to include a variety of tax increases in one way or another. As mentioned last month, one of the things we are doing to help clients has been to explore new types of tax-efficient wrappers, to help mitigate this

Investment houses' market views

On a 12 month +/-5% consensus view, apart from US smaller companies and Japanese equities - where they are neutral - they are positive on all equities. They are positive on UK corporate bonds but negative on gilts and neutral on international bonds. They are also neutral on all property and currencies.

The above is not intended to imply any advice.

MDM Associates Ltd, MDM House, High Street,

Ripley, Woking, Surrey, GU23 6AN.

(All data: source: Sharescope: to 30/11/09)