Chatfeild-Roberts: this rally may continue but beware of zombies

While John Chatfeild-Roberts believes the rally in equities could continue he warns about the impact rising interest rates could have.

The Jupiter chief investment officer made his comments as the Dow Jones hit its highest level in history and the FTSE soared to a five-year high.  

'While it would be overdoing it to say the global financial crisis is over, investors are starting to think more about the return on their money than the return of their money,' Chatfeild-Roberts said.

'The efforts made by central banks have [given], and are giving, economies time to heal. Six years on from the start of the crisis, many good businesses are thriving and while the valuations put on these companies are not cheap, they do not look overly expensive either. So, with quite a lot of cash still sitting on the side-lines, it is quite possible that the current rally will continue.

However, the Citywire Selection manager warned investors the rally is not built on strong foundations.   

'[However] while optimism is currently triumphing over fear, there are still a lot of problems to be overcome in economies such as Spain, Italy and France,' he said.

'At the corporate level there are plenty of "zombie" companies that are being kept alive by low interest rates and we should expect to see more businesses go to the wall, particularly when interest rates start to rise.'