A tricky balancing act, says Barclays Wealth economics research

News - Banking

Tuesday, 13 October 2009 11:37

The October edition of Barclays Wealth Signpost is entitled A tricky balancing act.

Michael Dicks, Head of Research at Barclays Wealth, said: “The global economy has shown increasing signs of turning around over the summer, helped by massive policy easing by central banks and finance ministries around the world. Riskier asset classes, such as equities and corporate bonds, have recovered as a result – much as we expected them to. Now, the key question for investors is how sustainable the rally is going to prove to be. We remain optimistic that better-than-expected macro-economic data, and a strong recovery in corporate profits, should help – along with the powerful momentum in markets – to sustain rallies through the fourth quarter. When it comes to 2010, however, policymakers will find it tougher walking the tightrope, balancing between providing sufficient stimuli to ensure that the recovery continues while preventing not only inflation but the creation of new asset price bubbles.”

Over the summer, confidence has grown that the global economy is turning around, with emerging markets leading the way. Asset prices are reflecting this shift.

In fact, the strength of the recovery in GDP for the next quarter could be slightly greater than is generally expected and, along with momentum, this may help support riskier asset classes.