Market volatility set to remain a market fixture

ON THE US

The recent downgrade of US debt, along with weak economic data in Europe, European bank funding problems and further fiscal tightening of EU members, has highlighted the need for major economies to deliver a globally co-ordinated policy response.

The inaction by policy makers is, in our view, one of the main reasons for the global equity market’s sell-off witnessed over the past quarter. During the third quarter, we reduced the cyclical exposure in the portfolio. While we do not expect the global economy to slow to 2008/09 levels, we believe it was prudent to reduce the risk from these holdings because of their correlation to economic growth. Our overweight to traditionally more economically sensitive sectors such as consumer discretionary and information technology, is bottom-up driven.  For instance, companies we have exp...