Realistic threat of a new downturn ahead in 2012

ON ASSET ALLOCATION

Investec's Max King on how risks of a sudden market setback are unlikely to disappear

Equity markets have had a strong run in the past two months but we expect them to rise further in the rest of this year and into 2011. Companies appear cautious in their guidance and analysts in their forecasts, which is likely to result in positive earnings surprises continuing for at least several more quarters. As 2012 forecasts start to appear, valuations are likely to be underpinned. Recent market strength is widely attributed to further QE in the US but it is not clear this would be an economic or market positive in anything but the short term; we believe modest valuations and s...