Pendal Group

The main driver of market weakness in our view is the deteriorating liquidity environment as credit markets close up and certain sovereign wealth funds and central banks are required to sell assets to offset capital flows or fund fiscal needs. Equities due to their relatively deep and liquid characteristics represent a source of funds in this environment and as a result can trade below fair value for some time. So where to from here? Ultimately the market mechanisms will kick in – low prices will deter some of the ‘forced selling’ and will also attract some of the sizeable amounts of cash sitting on the sidelines. Valuations are supportive and we believe that it would take a major negative – such as a recession – to see the market move down significantly from here. (VIEW LINK)


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