Ashburtons Perspective

Peter Bourne,
Managing
Director,
Ashburton

WELCOME

The perfect storm rages on. The effects of the sub-prime crisis and credit crunch have extended tangibly into the real economy, broadening the decline in house prices and puncturing consumer and investor confidence. Record high oil and food prices have accelerated inflationary pressures, which, combined with the consequent shift in interest rate expectations, are brewing an unpalatable cocktail for both the global economy and asset prices. Few, if any, markets have been spared. More recently, even those stalwarts of the past year, materials and commodity stocks, have come under pressure.

Arguments about the technical definition of recession and bear markets abound; well, as the saying goes, if it swims like a duck, quacks like a duck, looks like a duck, then chances are it is a duck!.

It is now a full year into the downturn. We had hoped, like many others, to be through the worst of it by now, but the second half of 2008 may well prove to be as trying as the first six months of the year. While a sharp reversal in the oil price may eventually trigger something of a recovery, in the meantime equity and bond markets continue to be pummelled by volatile swings in sentiment. Unfortunately there is little room to hide. Our money market funds and multiasset class products remain the preferred destination for most investors, who share our defensive bias in these trying times.

It seems appropriate then to focus this edition of Perspective on inflation. Peter Lucas, our Global Strategist, contrasts the current situation with that of the previous oil shock in the 70s and concludes that perhaps all is not as pessimistic as it may seem. Ian Leverington, manager of Ashburton's International Equity Fund, explores investment alternatives in inflationary times. And Investment Managers Luke Gale and Craig Farley review our investment strategy and present highlights of a recent visit to Taiwan respectively.

It has been a year since I took up my position at Ashburton. While it has been an exciting and eventful year, little did I imagine that I would be writing of bear markets and oil prices close to $150 a barrel at this time!

I look forward to being able to share more cheerful news as we progress through the remainder of this year.

Regards

Peter Bourne