We are delighted to bring you this new quarterly edition of ‘Investment Perspective’. Written by our global panel of experts, its particular aim is to help you navigate through capital markets, with topical articles that offer in-depth perspectives of both investor opportunities and investment risk. As detailed in our ‘2010 Investment Outlook’, we hold a positive central view of continued gradual recovery, but a consistent theme running through the publication – and indeed all our work – is also to identify risks. We believe this is at the heart of successful wealth management.
Emerging from a period of intense turmoil, we are now able to look to the future with growing optimism that economic growth is gaining traction, albeit fairly weakly in Europe. Unprecedented government and central bank support has succeeded in bringing us this far, but it has come at the cost of huge debt burdens across the industrialised world. Sooner or later this will have to be unwound, with potentially far-reaching consequences. The feature article ‘Wanted: a credible strategy for getting out of debt’, examines the scale of these debt burdens and what work needs to be done to bring debt ratios down to more prudent and sustainable levels that will allow for the global economic recovery to continue.
Some countries face much greater challenges than others as they seek to make the necessary adjustments, a theme which is explored in our UK and European Perspectives. The UK is one of those facing such an uphill battle in its struggle to contain its debt and recover from recession. Whatever decisions the next government takes, fiscal policy will have a significant impact on monetary policy and investors need to consider the implications of both and how they will interact. For the euro-zone, the process of convergence that has taken place over the past two decades has been thrown into reverse by the global financial crisis, as headlines about Greece’s ballooning yield spreads over German bunds continue to remind us.
China has led the way out of recession, but the whispers of ‘overheating’ are now growing louder. As a result, policy-makers there are faced with the unpalatable choice of higher inflation, higher interest rates or higher exchange rates. In ‘China’s undervalued currency – revaluation in 2010?’ we look at the potential for an appreciation of the renminbi and what the implications might be for investors. We hope you find this and the other articles in ‘Investment Perspective’ useful and informative.
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