I am in the middle of reading a book from 2008 that more or less "predicted" the unrest that we're now witnessing in the Middle East and North Africa.
In hindsight, perhaps many of us aren't really that surprised that unrest could take place. But I was completely caught off-guard by the speed at which changes happened.
For the fifth straight week we witnessed pretty substantial capital outflows from emerging market funds, but for how long will this continue, and what will the impact of the unrest be on developed markets?
European sovereign debt issues still exist and another round of tougher bank capital rules is also right around the corner, with some recommending that British regulators come down even harder on British banks than what is required from the European authorities. On top of that, the price of oil has soared. This alone is having a huge impact on market dynamics.
You should think of the spike in oil prices like a tax on global activity, according to Neil Dwane, managing director and chief investment officer for Europe for RCM.
"It costs more for all of us to do things when oil prices are high," Dwane said. "During the fourth quarter of last year and January of this year, investors had already started exiting emerging markets and were putting money back in developed markets."
"Inflation has been heading up for quite some time now, and markets have been driven by the belief that we should be allocating out of bonds and back into equities," he said.
So, if oil is higher, where are the opportunities?
Dwane recommended looking closer at companies with technology that makes us more efficient, like alternative energy companies, and said there are a lot of companies that couldn't compete when oil was at $50 per barrel, but now ,once again, can compete with oil at $100 per barrel.
Clear beneficiaries could be the exploration and production companies (like BG Group , Tullow Oil , and Cairn Energy ) for the simple reason that if they find oil in the ground, it is more valuable now that oil is at a higher price, Dwane said.
If oil prices remain high, policy makers will have to try to offset it, he added.
Authorities could either do this through more quantitative easing, or via growth supportive fiscal policies. If QE is big enough, the asset class to benefit the most in the longer term will be stocks, as long as the QE doesn't become inflationary, Dwane said.
While the FTSE-100 is up around 56 percent over the past two years, Dwane thinks there is a good chance that the UK market will grow 10 to 20 percent this year, with dividend growth being even better than earnings.