Value begins to bite in global equity markets

Dave Fishwick, Head of Macro and Equities Investment at M&G, says the outlook for equities, particularly in developed markets, is positive over the near to medium term.

Dave says: "Global equity markets generally appreciated over the first quarter in spite of a background of heightened tensions in North Africa, continued Chinese monetary tightening, Portuguese sovereign debt concerns and the Japanese earthquake.

"That these events have not prompted broad declines in equity markets appears to be a sign of value ‘biting' - assets are offering such high levels of compensation for risk that it would take particularly negative outcomes to prompt significant market falls."

He adds that there could be a significant re-rating of risk assets to more neutral levels, with a resulting positive return from shares.

"Positive price movements in global equity markets have failed to keep up with the earnings growth in many cases, meaning that selected markets such as Western equity markets still offer as good, if not better value than they did at the start of the year."