The case for portfolio diversification

As we enter Q4 it has been a remarkable period for investment markets, demonstrating how human behaviour more than anything is the main driving force for asset prices rather than true fundamentals.

The rally of the past few months could be characterised as ‘dash for trash’ where there has been an almost indiscriminate appetite for what are loosely described as ‘risk assets.’ Emerging markets have been a huge beneficiary of this, with the MSCI Emerging Markets Index rising more than 85% in dollar terms since the rally began, but even the MSCI World Index has gone up by close to 70% on a dollar basis on the same period. The case for emerging markets remains robust in general terms. With commodity prices recovering, oil-producing countries such as Russia or Brazil are benefitting a...