It is not always easy to make sense of the financial market jitters that have plagued us over the past few weeks. When looking for an explanation, it is clear that market technicals should be high on the list. In this respect we note that the very low interest rates have pushed new types of investors towards risky assets; investors who lack experience with equity investments. As a consequence their behaviour is resembling tourists in equity markets who have difficulties to stick to their positions in uncertain times. Instead, they seem more inclined to herd behaviour.

In the meantime, data suggest that global growth momentum remains intact. Therefore, we stick to our overweight positions in equities (small) and real estate (medium). Having said this, we admit that questions about the underlying fundamentals have also played a role in the market unrest.

## Global equities, real estate and the Treasury yield in 2014


## A concern is that  markets may disconnect with the real economy

Amidst all uncertainties one thing is absolutely clear: There are many moving parts in fundamental space and investors have difficulties to get grip on these parts. This situation is pretty conducive to eliciting bouts of market volatility. Loose global monetary policy has been acting as a very important “dampener” of market volatility. However, in periods in which this dampener is somewhat less effective in calming markets, one invariably starts to hear increased worries that markets may be getting way ahead of the real underlying economic situation.

## In our view there is no widespread overvaluation in risky assets

We are clearly not in the camp that believes in widespread overvaluation in risky assets. We will give two arguments for our continuous positive view on equities (small overweight) and real estate (medium overweight).

### 1.    Global growth momentum remains intact

Data suggest that global growth momentum remains intact. The Global PMI continues to hover in a range consistent with moderately above potential global growth. Momentum in global retail sales has picked up over the past few months and will receive a further boost from the sharp fall in commodity prices.

### 2.    Global Economy has support from dollar, oil price and yields

Lower oil prices are favourable for disposable incomes of households. Besides, companies will benefit, due to lower input costs. Lower US bond yields imply breathing space for emerging markets. Finally, the stronger dollar is favourable for economic and earnings growth in Europe, Japan and the emerging world.