February 2010
The Low Interest Rate Dilemma
The past two years will go down in history as the most bizarre year from a financial perspective in living memory. Now that we all seem to have survived the turbulence we can reflect on how could it all have happened? Each day in late 2008 new rumours of the possible collapse of another household name bank and people changed their view away from how much interest will I get on my deposit to will I lose my capital?
The aftermath of all of this turbulence and the downturn created by it has meant that interest rates are negligible and seem set to stay at low levels whilst economists remain scared of killing off a recovery by raising rates too early. For the investor this has created a dilemma as to where to invest in order to achieve an acceptable return.
Many corporate bonds were well priced for the investor earlier in 2009 but now thoughts of possible future inflationary pressures creep back into people’s minds. Equities having fallen by such huge levels in late 2008 and early 2009 have come back with a bounce, but where to from here? As always a selective approach is required to place funds into quality stocks directly or buy into managers whose style and skills are suited to these uncertain times. Uncertainty should be viewed as opportunity and unlike during the back end of a boom there is certainly more long-term upside potential and arguably less downside.
As always selectivity is vital and careful thought and advice needs to be taken. For more details on how Pegasus can assist in this process please contact information@pegasus-fs.com