THE performance of global equities has been disappointing considering that the US dollar has turned and the price of oil has dropped, says Peter Lucas, global investment strategist of active fund managers at Ashburton.

‘The US dollar has risen seven per cent against the euro and nine per cent against the sterling,’ said Mr Lucas. ‘The oil price has dropped around 20 per cent and inflationary expectations have improved considerably. In light of these helpful developments, the performance of global equities has been disappointing.

‘The MSCI World Index has barely risen, and some markets have continued to fall. The lacklustre performance is in part due to the fall in energy and basic material shares – itself a logical consequence of lower commodity prices.’
Mr Lucas believes that the bearish case for equities rests with the continuing credit crunch and signs that the American slowdown is spreading to the broader economy.

‘Following a brief period of relief credit spreads are widening again, with many of the weaker players now paying more for their debt today than they were back in March,’ he said. ‘The economic news in Europe and Britain has deteriorated noticeably and the reluctance of the European Central Bank and MPC to cut rates, due to lingering inflation fears, merely serves to deepen the gloom.’