Personal Finance: Brian Tora column

I FEEL spoilt for choice this week. Should I reflect on the launch of the new European currency or the return of "irrational exuberance" to stockmarkets? Perhaps I had better deal with both.

The stockmarket generally rises in the first weeks of the new year. Heaven knows why. In December, a buoyant market is put down to the "Santa Claus" effect, which, in reality, is fund managers carrying out housekeeping before the year end.

January is meant to be more considered, but markets tend to rise on average, as fund managers position themselves for the year ahead. The surge this week was attributed to US managers cutting back the cash piles built up during trickier times.

Did I hear someone mention horses, stable doors and bolts? It feels that way. What is more, technology stocks are again sucking in cash. The price/earnings multiple on the Dow is now close to 40, and no thinking fund manager with a sense of history can put their hand on their heart and say this does not leave the market highly vulnerable. If it goes on like this, when the correction comes, it will be swift and dramatic.

At least the euro got off to a cracking start. There must be a few who wonder why the Square Mile put in so much effort, given that we elected to stay on the sidelines. The reality is that the euro is as much a threat as an opportunity. London dominates foreign exchange trading, and could suffer declining volumes as a result of fewer transactions in the base European currencies that will be subsumed into the euro.

Make no mistake, the euro will make a difference. It will aid the competitive edge of European companies. More important, it will level the playing field forexamining the differences between shares in the same industry.

There is an argument for investing in Europe on the basis that it is behind the US and UK in the economic cycle. A stronger argument, in my view, is that there will be some catching up to be done if the euro is seen to work, and European companies start to be rated against their US counterparts. The demand for European shares - and for European funds - could be strong.

This pre-supposes that the single currency works, which is not guaranteed. We did not stay out just to be bloody minded, and it is too easy to be lulled by the euphoria of a successful launch into believing that all the ducks will swim neatly into a row. Europe is not a single economic entity yet, and taxation, cultural and bureaucratic differences may yet throw strains upon the system.

However, there is much money and prestige riding upon the successful delivery of EMU. If it does all go according to plan, then we will not be talking about Europe as a part of the geographic asset diversification of a portfolio. As Europeans living in Europe, we will be investing in European shares, perhaps buying European theme funds to gain exposure to particular industries. Investors who want to be ahead of the game should think about starting now.

Brian Tora is chairman of the Greig Middleton investment strategy committee

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Recruitment Genius: Sales Executive - £40,000 - £70,000 OTE

    £40000 - £70000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: (Senior) IT Business Analyst - London - European projects

    £45000 per annum: Ashdown Group: A successful & reputable global business is l...

    Recruitment Genius: Engineering Project Manager

    £35000 per annum: Recruitment Genius: This company is going through a period o...

    Recruitment Genius: Senior Software Developer - Java

    Negotiable: Recruitment Genius: This award-winning digital publishing solution...

    Day In a Page

    Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

    Isis stands strong as its numerous enemies fail to find a common plan to defeat it

    The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
    Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

    Virtual reality: Seeing is believing

    Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
    Homeless Veterans appeal: MP says Coalition ‘not doing enough’

    Homeless Veterans appeal

    MP says Coalition ‘not doing enough’ to help
    Larry David, Steve Coogan and other comedians share stories of depression in new documentary

    Comedians share stories of depression

    The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
    Has The Archers lost the plot with it's spicy storylines?

    Has The Archers lost the plot?

    A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
    English Heritage adds 14 post-war office buildings to its protected lists

    14 office buildings added to protected lists

    Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
    Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

    Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

    Scientists unearthed the cranial fragments from Manot Cave in West Galilee
    World War Z author Max Brooks honours WW1's Harlem Hellfighters in new graphic novel

    Max Brooks honours Harlem Hellfighters

    The author talks about race, legacy and his Will Smith film option to Tim Walker
    Why the league system no longer measures up

    League system no longer measures up

    Jon Coles, former head of standards at the Department of Education, used to be in charge of school performance rankings. He explains how he would reform the system
    Valentine's Day cards: 5 best online card shops

    Don't leave it to the petrol station: The best online card shops for Valentine's Day

    Can't find a card you like on the high street? Try one of these sites for individual, personalised options, whatever your taste
    Diego Costa: Devil in blue who upsets defences is a reminder of what Liverpool have lost

    Devil in blue Costa is a reminder of what Liverpool have lost

    The Reds are desperately missing Luis Suarez, says Ian Herbert
    Ashley Giles: 'I'll watch England – but not as a fan'

    Ashley Giles: 'I'll watch England – but not as a fan'

    Former one-day coach says he will ‘observe’ their World Cup games – but ‘won’t be jumping up and down’
    Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

    Greece elections

    In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
    Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

    Holocaust Memorial Day

    Nazi victims remembered as spectre of prejudice reappears over Europe
    Fortitude and the Arctic attraction: Our fascination with the last great wilderness

    Magnetic north

    The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness