Billions of pounds of cash a could be about to move into the stock market that is right now invested in Government Bonds. Fidelity, Black Rock and Goldman Sachs have reported that investors may start to move money from “safe haven” assets into shares over the coming weeks.
This could result in a rally in shares but also prick the bubble in government bond prices. Last week saw the yield on Britains 10 year bonds creep above 2% for the first time since May 2011 – which indicates investors are selling bonds. A move to only circa 4% yields could mean a fall in capital value of up to 25% on some government issued securities.
We are cautiously optimistic on shares but the political backdrop in the US and in Europe will be key to investment returns in the coming weeks and months.