Five tactical considerations for investors

In April's Investment Watch we rationalise the abnormal macro environment driving current market strength. We aren't changing our strategy, but we do highlight the need for investors to tread cautiously in 2015 via some tactical considerations: 1) Don’t become complacent about capital value: Understand that it is possible to suffer losses on capital value on “yield” stocks. 2) Moderate return expectations: Markets will adjust when the era of abundant liquidity and ultra-low rates inevitably ends. 3) Expect higher levels of volatility: The normalisation of global rates could very easily trigger bond market volatility and asset price rebalancing. 4) Hold higher levels of cash: This affords the flexibility to capitalise on any bouts of volatility as it arises. Many institutions are doing so. 5) Constantly monitor portfolios: Make risk management a habit. May and June are statistically weak months as risk exposure is reduced into the end of the fiscal year. Beware the "Sell in May and go away" phenomenon.