Specialist Independent Advisers based in East Anglia

Lovewell Blake Financial Planning Limited

Media Centre

Market Commentary Q3 2011

1 July 2011

June saw some much needed relief for equity investors, following improved economic data from the US at that time, together with the approval of austerity measures by the Greek parliament. Indeed the US and UK markets managed a rise in excess of 5% with Europe not far behind. Asian markets did less well but were still firmly in positive territory. The end of June produced the best period for global equity markets since mid 2009 but these gains have now been reversed in the equity sell off that happened during August.

Government bond markets had a weak second quarter. In particular US treasuries were no longer the beneficiaries of safe haven demand and declined significantly. However, income from bonds still looks attractive when compared to the return available on cash and should we see interest rates rise, the prices of many bonds will fall, especially those of gilts and higher quality 'investment grade' bonds.

The UK property market seems to have regained some equilibrium and we anticipate returns over the remainder of 2011 to be modest and largely driven by rental income.

European sovereign debt concerns remain high but there are many world class European companies which do not rely on the European consumer. Germany should continue to benefit from the weak Euro.

In the US, government efforts to stimulate growth appeared to have been working until the market sell-off in August. These efforts to stimulate growth have come at a cost with the budget deficit running into trillions of dollars. With the US being home to many of the world's leading companies, it is simply a too important geographical region to ignore.

The falls seen in stock-markets around the world will have undoubtedly unnerved many investors. There are significant elements behind the market volatility, with some Euro-zone countries facing real fiscal problems and the recently released weaker economic data from the US threatening global growth. As a result of this, global markets have and continue to be affected to a great extent by investor panic rather than a considered evaluation of the true prospects for global assets.

We have seen that stock market falls can be sudden, but very often markets can rise just as rapidly. With investor confidence still extremely fragile, we expect the current level of volatility to continue, and believe in the current economic climate that this volatility should be viewed as part of normal stock-market life.

We feel that investors should remain invested if there are no short-term needs for cash. For new investors this period could be used as an opportunity to enter the market at a low.