Fund managers Baring Asset Management are advising charities not to sell equity investments because of fears over the impending war with Iraq.
The firm believes that talk of war with Iraq and North Korea is affecting market sentiment but that equities are still cheap.
Percival Stanion, chairman of Barings' strategic policy group, said: "Equity markets are pricing in a relatively brief conflict in the Middle East, given the overwhelming technological advantage of the US and its partners. A long, drawn-out war would clearly be negative for investors. However, we could see a relief rally if the situation there was resolved quickly and easily, most likely in the first half of the year."
Stanion said that equities were cheap and offered the best combination of risk and reward for medium- and long-term investors.
Currently businesses are delaying capital investment because of the threat of war, with a negative effect on the financial markets.