Our market view
July 2010
Growth conundrum - A two-speed global economic adjustment has emerged in recent months. While countries such as China and India continue to power ahead, the economies of Europe and the US are barely showing signs of life. In the western world, it is fair to say that we have left the recession behind us, at least for now, but this does mean that a sustainable economic recovery is underway.
May/June 2010
A Question of Balance - Global financial markets are in turmoil again. To a large extent, this is the result of economic imbalances caused by a fundamental change in the dynamics of capital flows. These imbalances have long been in existence but they have intensified in the wake of the recent financial crisis. If unchecked, they have the potential to undermine the nascent global recovery.
April 2010
Apocalypse later - To judge by the reaction in equity markets to last month’s agreement to bail out the ailing Greek economy from financial disaster, neutral observers might be forgiven for thinking that the crisis has passed. Had those observers reflected on subsequent developments in the bond markets, however, they would have drawn an altogether different conclusion: that the crisis is very much alive.
March 2010
In the last edition of Investment News (December 2009), we asked “where’s the growth?” Since then, the question has lost neither its relevance nor its urgency. For all the media ballyhoo about the major economies emerging from recession, optimism about a sustainable global economic recovery has yet to be corroborated by hard evidence from the real world.
February 2010
Paper jam - One of the central pillars in the authorities’ policy response to the financial crisis last year was to take interest rates as low as feasibly possible as part of a drive to provide cheap, abundant liquidity. Another key tactic in this regard was “quantitative easing”, whereby money is effectively printed for central banks to purchase assets from cash-strapped institutions and companies. Arguments about their efficacy aside, these initiatives have created an unsustainable liquidity bubble. At some point, central banks will seek to withdraw these facilities (some have already tentatively begun to do this), as they implement their “exit strategies”.
January 2010
Sovereign debt concerns - In the final weeks of 2009, the debt crisis, which had hitherto been centred at the banking and corporate levels, began to assume an altogether different dimension. Revelations of financial difficulties in Dubai were compounded by news of an actual credit downgrade for Greece and the threat of one for Spain, with the spotlight then moving to Ireland, Italy, Portugal and even the UK.
December 2009
Where’s the growth? Recent economic growth data have confirmed that many of the world's major economies are emerging from recession. But analysts remain divided as to whether the ongoing recovery will forge ahead or be "double-dipped", in which a nascent recovery peters out before sliding back into recession. The next few quarters are likely to end the debate one way or another.
November 2009
Market risk is acceptable… While there is increasing evidence to support the view that the global economic slowdown is over, a sustainable recovery remains far from certain. A recovery requires growth; growth requires spending; spending requires employment; and employment is contingent upon investment, which is dependent to a large degree on the supply of credit.
October 2009
Increasing signs of economic vitality around the world continue to support claims that the financial crisis-engendered recession is coming to an end. At least a growing list of political and economic luminaries believes this to be the case, although, in statements from the central bank elite, the word "probably" is a notable feature.
August 2009
Tentative signs of economic rejuvenation have led to concerns in recent months about central banks' "exit strategies". Specifically, investors are worried that the monetary authorities may react too late to the changing economic outlook in reining in the expansionary policies that were the response to last year's financial crisis; in particular, they fear the long-term inflationary implications of flooding the financial system with liquidity.
July 2009
Given the recent tentative signs of recovery in the global economy, investors' focus has somewhat shifted away from how the financial authorities should tackle the impact of last year's financial meltdown to how they can unwind the measures adopted to do so. These so-called "exit strategies" will be vital in maintaining confidence, since the markets are well aware of the potentially disastrous inflationary consequences engendered by extraordinary monetary easing.
June 2009
In mid-May, much attention was given to the OECD's latest Composite Leading Indicators report, compiled with data from March 2009. Surprisingly, the report revealed a pause in the economic downturn in four economies: China, France, Italy and the UK.
May 2009
Following the sharp upturn in the equity markets that began in early March, analysts have been divided on the issue of whether the advance is the beginning of a sustainable upward development or merely a protracted bear-market rally.
April 2009
During the first quarter, economic data has continued to confirm a deepening recession. Growth and industrial production have slumped in the major economies, global trade has effectively come to a standstill and unemployment is rising rapidly. Monetary and fiscal stimulus packages have yet to have any impact on economic activity and it may be several months before they do.
February / March 2009
On 13 February, President Obama's $787 billion stimulus plan was finally approved. A mixture of tax cuts and spending initiatives, the plan seeks to create up to four million domestic jobs and eventually revive the country's economic fortunes, although opinions differ considerably as to how long it might take before the plan's ambitions become reality.
February 2009
Tradition dictates that financial market soothsayers present their opinions at the beginning of each calendar year about prospects for the coming twelve months. Aside from the expedient optimism of diehard Wall Street bulls, the consensus outlook has rarely been as uniformly gloomy as it is currently.