Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Skittish world market underplays impact of Ebola outbreak in Africa

Skittish world market underplays impact of Ebola outbreak in Africa

This week I caught up with James Maltin from Rathbones and Investec’s Charles Hawkins, fellow cyclists on the epic journey from London to Paris in June, writes Libby Ashby.

Before our discussions turned to more serious matters such as the conflicts around the world and their effects on the markets, we reminisced about the pain, laughter and incredible sights over the gruelling but rewarding four days.

‘I thoroughly enjoyed London to Paris and it was very well organised. I’m more open to doing it a second time than I was the first time round now I know what it’s all about,’ Hawkins said.

Maltin agreed: ‘London to Paris was marvellous; it was seamlessly organised and with a rich variety of fascinating and enthusiastic people coming together for a great cause.’

Having only been on my bike once since the finish line, I asked them how much cycling they were now doing. Hawkins replied: ‘I missed cycling and I seized up so I had to start cycling to work again.’

Maltin has done a few long rides around Amersham and Kent and even cycled a few laps of Richmond Park one morning before work. He’s thinking about doing ‘Seven in Seven’ next summer, which takes in seven countries in seven days and covers 700 miles from Italy, over the Alps and finishing in London.

Hawkins has very much caught the cycling bug and has even bought his wife a bike so they can go out together. ‘I would say I’m now a keen cyclist and very happy on my bike. I’m looking to do sportives, non-competitive long-distance rides, in my area.’

With that, Hawkins had to dash off to another meeting and talk turned to the economy and the various tensions across the globe.

‘There has been an increase in risk aversion given geopolitical uncertainty over the Middle East and the conflict in Crimea,’ Maltin said.

He described how the markets aren’t reacting as one would usually expect to news such as the Ebola outbreak in West Africa. ‘The markets are not accurately appraising the threat posed by the outbreak of Ebola and, in my opinion, it is currently the biggest threat to world trade’ he said.

‘If the disease spreads, airports will close, international travel will cease and there will be widespread panic as well as the loss of many lives. There is no known cure and the potential for the disease to spread is alarming.’

We then discussed the recent movements in the bond markets. ‘In the last month, complacency has set in to investors’ psychology, which means risk is no longer accurately priced. For example, the yield on Spanish 10-year government bonds recently traded lower than the yield on 10-year UK gilts.

‘Given the comparative economic situations of the two countries – as indicated by the unemployment rate, which in the UK stands at 6.5% while in Spain it is 24.5% – seems inaccurate,’ he said.

‘While there has been a mild correction over the last week, this may just be the beginning. The correction might not yet be over,’ he said.

I asked him when he thought the Bank of England might raise interest rates and what the impact could be. ‘I don’t think there will be a rise in interest rates any time soon. The economy is too fragile – consumers still have too much debt and are unable to save enough. I think a rise in rates would derail a fragile recovery,’ he said. 

Maltin thinks one should be careful when interpreting current financial data and drawing conclusions on the economic outlook.

‘The equity risk premium is now much more in line with its average long-term rate as it’s back to where it was in 2007, before the crisis,’ he said. ‘However, I don’t think this should be seen as an indicator of a strong recovery because the UK and world economy aren’t as stable as they could be.’

If you would like to arrange a meeting, email me on lashby@citywire.co.uk

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Mark Barnett - part 2: why I'm not buying Lloyds

Mark Barnett - part 2: why I'm not buying Lloyds

In the second part of our exclusive video interview, Barnett explains why he has no intention of buying Lloyds, and where he sees the greatest income opportunities.

Play Wealth managers reveal the best investment ideas of the year

Wealth managers reveal the best investment ideas of the year

From robotics to impact investing, wealth managers share the best ideas they have heard this year.

Play Baillie Gifford's Earnshaw on Xi Jinping's 'new era'

Baillie Gifford's Earnshaw on Xi Jinping's 'new era'

Sophie Earnshaw talks through what Xi Jinping's 'new era' means for investors. and why Chinese tech offers some of best growth stocks in the world.

Read More
Your Business: Cover Star Club

Profile: JM Finn on why the future is with financial planners

Profile: JM Finn on why the future is with financial planners

There is a lot of work on pension consolidation and Sipps have been a big driver there, says JM Finn chief executive

Wealth Manager on Twitter