The year has started with a lot of volatility but we believe that the markets will move back to a more positive and calmer environment in the coming months. Our outlook which can be accessed here: Silk Invest Investment Outlook 2015, showcases our views on global markets and contrasts the market drivers across Developed, Emerging and Frontier markets.
Our position diverges from consensus but fundamentally speaking we see a lot of mispricing in the market and solid conditions for positive returns. We believe that Emerging Markets in general will be more positive in 2015 and that Frontier Markets will once again outperform. Frontier Markets remain well positioned from both a valuation and macro point of view. They did relatively well in 2014 and we firmly believe that across equities and bonds, 2015 will be an even better year. Developed markets are trading at historically high valuation multiples and low bond yields while Emerging Markets and Frontier Markets are selling at steep discounts. Within equities, we believe that discounts will come down in the latter part of 2015. On the bond side, EM hard currency spreads are relatively tight but local currency bonds look very attractive, especially in Africa.
We are therefore very optimistic about the year but believe that markets will not move in a linearly line and volatility will remain high. As an investment house, we believe that commodity prices are not the major driver of value but unfortunately most investors are happy to build their investment thesis on this. The net result is volatility and short-term noise but very limited impact over a medium to long term horizon, except when investing in commodities stocks which we don’t. We have always preferred to invest in solid companies and Frontier governments which are not relying on commodities to grow.
I hope you will take a moment to read our investment outlook and please feel free to get in touch with us if you have any questions or wish to share your feedback with us. I am looking forward to any questions or comments and wish you all the best for 2015.