Fisher Wealth Management

FWM Warns Investors of the 'Great Unknown'

In six months, markets will be faced with the end of a source of great economic stability, warns investment house Fisher Wealth Management, as Alan Greenspan, Chairman of the US Federal Reserve since 1987, retires.  The date is set for 31st January 2006 but the outcome – Greenspan’s successor – is impossible to predict, almost certainly creating market volatility. 

Fisher Wealth Management believes that expected events do not move markets: even the terror attacks in London, seen as inevitable for some time, have had a limited effect on markets with the FTSE 100 reaching a three-year high one week on.  Events which cannot be quantified in advance, such as Greenspan’s successor, have a much greater impact, particularly in this case as President Bush has a history of keeping his appointments secret prior to an official announcement.

The 25 years that Alan Greenspan and his predecessor Paul Volcker have run the Federal Reserve have become characterised by responsible monetary policy resulting in declining inflation and stable growth, says Fisher Wealth Management.  This could all change if an inappropriate successor is appointed, an outcome to which markets will likely react negatively.

Managing Director Richard Fellows said: “Uncertainty over who will replace Greenspan presents the world with a tricky risk factor.  We think it will be difficult for capital markets to discount a successor in advance but once a name is announced markets will react quickly and decisively, positively or negatively. Until then, the uncertainty will promote continued risk aversion.”

Fellows continued, “Without volunteering any names for Greenspan’s successor, I believe markets will favour a candidate with experience of central banking or capital markets or ideally both. Pure academics or former corporate executives with no capital markets experience will be viewed less favorably.”

Despite these uncertainties, Fisher Wealth Management maintains its positive view on the prospects for the US economy and stock market. Fellows concludes: “The US dollar has strengthened relative to all major currencies so far this year, long-term interest rates in the US remain benign and corporate earnings have been well ahead of expectations. Even with such a large unknown facing the market, these factors mean we remain bullish on equities.”

NOTES TO EDITORS

FISHER INVESTMENTS EUROPE LTD and FISHER INVESTMENTS

For a copy of Fisher Wealth Management’s comprehensive Markets Commentary report, visit www.fisherwm.co.uk or call 0845 458 1194.

Fisher Wealth Management is the operating name of Fisher Investments Europe Limited which is registered in England and is authorised and regulated by the Financial Services Authority. (Company number 3850593. Registered office: 16 Curzon Street, London W1J 5HP). Investment management services offered by the Company in the United Kingdom are provided by Fisher Investments.

San Francisco-based Fisher Investments is a discretionary, fee-based investment manager and adviser, established in the USA and regulated by the US Securities and Exchange Commission (SEC). The protections of the UK regulatory system, including the Financial Services Compensation Scheme, do not apply in relation to its services. The Company provides a variety of wealth management strategies and services to high net worth individuals and institutions, throughout North America and the United Kingdom.

With its founder’s industry history going back over 30 years, Fisher Investments has built a reputation of experience and innovation. From engineering the Price-to-Sales Ratio, to pioneering the identification of the Small Cap Value asset class, to recent developments in behavioural finance, Fisher Investments has continued to develop capital markets investment technologies for the purpose of providing excess return relative to benchmarks.

Ken Fisher's ‘Portfolio Strategy’ column in Forbes magazine, which he has been writing for the last 20+ years, is at www.fi.com/forbes.

The past is not necessarily a guide to future performance. The value of investments and the income from them will fluctuate with world stock markets and international currency exchange rates.