A change of monetary policy in the US is the biggest risk to equities globally

A change of monetary policy in the US is the biggest risk to equities globally. Despite being well flagged, the first increase in US Federal Funds Target Rate will add to market volatility. On May 21, 2013 Bernanke the then Chairman of the US Federal Reserve first flagged the notion of gradually reducing the bond purchasing (Quantitative Easing) program. The volatility spike, famously dubbed the 'taper tantrum', which followed saw the S&P 500 pull back 7.5% and our market give back 12.5%. It is entirely conceivable that we see a similar reaction from the market in the middle of the year, when the Fed is expected to raise rates for the first time after a six year easing cycle that included unprecedented use of unconventional policy tools. Carrying higher levels of cash into May/June this year, which is a seasonally volatile period for equities, would be an effective hedge against this risk.