Perspectives

As we look into 2012, we continue to see significant risks in the global economy, as a result of the continued effects of deleveraging by over-indebted countries.

As a year of revolutions and riots drew to a close, scientists were reported to have discovered new Earth-like planets, hundreds of light years away.

Given the significant divergence in government bond market fortunes over recent weeks and months, we thought it would be worthwhile to explain the current exposure of our key bond strategies.

High yield markets usually decline during periods of risk aversion; the extent of such a decline should, however, be less than that experienced in equity markets, as the fixed income characteristics of the asset class provide some downside protection. Moreover, in this period of low rates and low growth, the attractiveness of an asset class which offers a current yield of 8-9% is likely, we believe, to become clearer.

The explanations for disorder on England's high streets in August have been varied and inconclusive, but those for the summer's pandemonium in financial markets seem clearer.

The dreaded phrase "we will have to let you go" is being used repeatedly in western economies as employers cut their cloth according to the prolonged low-growth environment which many perceive to lie ahead. Could the phrase be applied to a country?

Diversity is instrumental to the development of well-run, sustainable companies.

At Newton, our use of themes is invaluable in helping us to gain perspective on the important risks and opportunities in investment markets.

The high yield market fell sharply (by 1.5%) from 1 June to 21 June as uncertainty over the re-emergence of Greek sovereign debt concerns prompted investors to make a swift exit from riskier assets.

The second quarter may prove to have been one of unfortunate euphemism, should the effects of Japan's natural disaster, the sovereign debt crisis in Greece, rising inflation and political posturing over US government borrowing transpire not to be as fleeting as some suppose.

A new look at what to do when domestic safe haven markets no longer provide comfort

The coming months are once again full of difficult events and issues for the bond markets. These include the end of QE2, encroachment of the US debt ceiling and the ongoing eurozone crisis.

There were 'black swan' moments in political, economic and financial-market spheres, as well as in cinemas, during the opening months of the year, but investors were almost balletic in the poise with which they met their challenges.

Following a significant decline in U.S. bond yields in the last quarter of 2010, there are some investors who suggest that bond yields will rise substantially, while others remain more complacent.

The efforts of central banks and governments in developed economies to deal with the aftermath of the global credit crisis have brought some near-term successes;

We seem to have written frequently about the eurozone crisis, and it will probably continue to 'dog' investors for months to come. Recent developments do, however, give us some encouragement.

The sale of Roy Lichtenstein's Ohhh...Alright painting in New York in November symbolised the prevailing sentiment in financial markets during the closing months of 2010.