Aug/10 - The Economy - Which way is it going to go?
Well what do you think? Are we heading for a double dip recession?
House prices seem to be dropping which is not a good sign unless you are a first time buyer but, if you are, then you have your own problems as you can’t get a mortgage without the help of the Bank of Mum and Dad.
Public Sector cuts are approaching like a runaway train and that will obviously have a massive negative impact on the overall economy with less spending, higher unemployment benefits retraining costs etc. This also impacts on potential growth within the Private Sector.
VAT will increase soon and inflation seems to be higher than the targets that have been set.
So it’s all a bit gloomy...or is it?
I read a very interesting article by David Smith of the Sunday Times that gave me some encouragement.
He highlighted the following interesting and positive facts that demonstrate that the world economy is actually recovering at a reasonable pace.
Emerging economies like China and India are leading the way with forecasts from the IMF of growth of around 6.5% but the same body is also predicting growth of 2.5% from America and Britain.
Similarly, the European Central Bank has raised its Eurozone growth forecast to 1.6%, up from 1%.
The World Trade Organisation says that the value of world trade rose by 25% in the first six months of 2010 compared with the same period in 2009.
All positive messages so why is there still a feeling of negativity?
From a business point of view firms don’t want to jump the gun, orders may be increasing but it is still early, CEO’s prefer to work away consolidating their businesses rather than making loud positive statements about a return to profits.
The political environment that we are experiencing also seems to add to the fear factor. There are still politicians who are preparing us for the worst whilst hoping that when it doesn’t happen they will be given the credit for preventing meltdown.
Stock markets seem to be hyper sensitive to any news good or bad with big swings on a daily basis depending on the news of the day.
This is all reported to an audience that is scrutinizing every piece of news for a sign that it will get better.
Unfortunately the doom and gloom merchants tend to win the propaganda war and this adds to the negative feelings.
What has this got to do with a Hot Topic from Simple Solutions?
Our Hot Topics are used to educate clients and highlight opportunities for them and these signs tell me that there is an opportunity to make my clients some money.
They certainly wont make any money from deposits as inflation is eating way at their capital.
If you are prepared to take a 5-year view then I firmly believe that we will do well.
Our investment process is designed to take advantage of different economies and geographic sectors.
We can benefit from continuing growth in emerging markets such as Latin America, China and India.
We can realise solid returns from improvements in the commercial property sector and we can benefit from the modest but steady growth in the US, UK and Europe.
If you would like to arrange a meeting with one of our Advisers to discuss how we can help you please contact us.