Economic & Market Update

What a difference a year makes. This time last year we were all fearful we may have been witnessing the end of capitalism as we know it. Fortunately those dire predictions were not forthcoming and we seem to have averted Armageddon. Only time will tell whether we are now in full recovery mode or still facing headwinds!

Based on attendance at the most recent briefings our broad economic view is maintained with the following being the key thoughts:

• While the broader equity markets have rallied strongly over the past six months we still face uncertain economic times;
• The uncertainties particularly relate to the major developed world economies. The key expectation appears to be for weak economic growth and a slow recovery in the developed world.
• Expectations for weak economic growth are in turn based on the expected impact of lower consumer spending, an inevitable consequence of high unemployment particularly in the US and consumers choosing to reduce their historically high debt levels.
• The government stimulus packages appear to have worked in the short term however experts point to the growing government debt and budgetary deficits as future drains on consumer spending. It is evident that governments in the developed world will need to cut spending and/or increase taxes to fund the eventual repayment of debt and balancing of their books.
• The markets appear to be pricing in a sustainable economic recovery that we and many commentators believe remains extremely uncertain.

As always if you have any questions or concerns about the markets or portfolios please contact your advisor.