Global stock markets have been enduring significant volatility in recent months because of turmoil in the credit markets and fears of an economic slowdown. Such sharp movements in share values can cause some nervousness among investors. However, we believe the medium term outlook for shares remains positive and that these periods of volatility can provide opportunities for long term investors.

Edward Bonham Carter, chief executive of Jupiter Asset Management, said: "Stock markets are volatile by their nature and in recent years we have enjoyed a rare period of unusually low volatility - until the emergence of the subprime credit crisis in the second half of 2007.

"As the subprime crisis has emerged in recent months, fears over the outlook for western economies have grown as banks have become more reluctant to lend to businesses and consumers. These concerns have gathered in intensity as negative economic indicators and corporate news, including write-downs by banks in relation to subprime loans and a difficult housing market, have emerged. In addition, investors are grappling with uncertainty over the extent to which central banks can cut interest rates in the face of inflationary pressures from rising food and oil prices.

"We have seen that central banks are prepared to react to these concerns, with the US Federal Reserve cutting interest rates to 2%, as well supporting market stability with additional measures.

"However, sentiment is likely to remain cautious until investors are confident that the banks' exposure to the credit crunch is completely understood and there is greater visibility on how far consumer spending and the wider economy will be affected. This could take a number of months.

"While these periods of heightened market volatility can be destabilising, they can also provide buying opportunities for long term investors as markets tend to focus on bad rather than good news and potentially exaggerate their effects.

"I continue to believe that stock market fundamentals remain positive, albeit dampened by the prospect of slower economic growth and tighter lending conditions as banks strengthen balance sheets. Our view is that while economic growth will slow, the global economy is unlikely to go into recession this year and that the inflationary impact of higher food and oil prices will be limited as they are unlikely to result in higher wages due to strong competition in labour markets.

"We should not be surprised to see further earnings downgrades by companies as the economy slows, particularly in certain financial stocks and in those companies and sectors exposed to over-stretched consumers. Nevertheless, corporate balance sheets are, on the whole, in sound condition and share prices of many companies are already discounting the slowing outlook for earnings.

"Assuming central banks continue to respond to the slowdown in growth and the major economies do not go into a deep and prolonged recession, equities represent attractive investments relative to other asset classes. So, I believe investors should hold their nerve and view sharp downturns in share prices as a long term buying opportunity - with the proviso that stock selection remains key."

NOTE

Jupiter Unit Trust Managers Limited (JUTM) and Jupiter Asset Management Limited (JAM) are both authorised and regulated by the Financial Services Authority and their registered address is 1 Grosvenor Place London SW1X 7JJ. They are both subsidiaries of Jupiter Investment Management Group Limited and the group is collectively known as "Jupiter". The above commentary represents the views of the Fund Manager at the time of preparation and may be subject to change. They are not necessarily those of Jupiter and should not be interpreted as investment advice. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given.