Russell Investments' John Velis says Europe's leaders can avoid messy conclusion to euro crisis.
In Europe, our “square-root-sign” recovery still seems like the most probable scenario. In some ways, such a modest trajectory represents a bit of a disappointment.
As we have been saying, the usual recovery after a recession is often sharp and quick, akin to the letter ‘V’. Yet, the 2008 Great Recession, the severest global contraction since the Great Depression, has not been followed by such a steep recovery.
The euro crisis continues to weigh on investors’ minds, as they seek to determine which sovereign bond funds remain risk free.
The results of the Irish bank stress test results, exacerbated by the full revelation of Portugal’s debt, have undermined the confidence of some investors, while others take this disclosure as an opportunity.
We believe current arrangements are still insufficient to ensure a neat outcome to the euro crisis, but we also believe leaders in Europe are inching closer to adopting the necessary measures to prevent a messy conclusion.
Until an adequate solution is crafted, European dominos will still teeter from time to time and markets will be buffetted.
Inflation remains a key watchword, particularly in the UK. Despite the Bank of England’s assurances all through last autumn, inflation is not only above its 2% target – it is continuing to rise.
The Bank risks losing credibility and is well aware of this. Previous talk of more quantitative easing – and the Bank has presented compelling evidence the factors behind this higher-than-expected figure are beyond the control of monetary policy.
We find their arguments credible. The UK is a classic small open economy.
It is what we call a ‘price taker’ on global markets. Rising prices for energy and other commodities combined with weak sterling essentially ‘import’ inflation into Britain.
Add the government’s VAT increase and you have a number of obvious reasons for these high inflation numbers.
Source: http://www.investmentweek.co.uk
In Europe, our “square-root-sign” recovery still seems like the most probable scenario. In some ways, such a modest trajectory represents a bit of a disappointment.
As we have been saying, the usual recovery after a recession is often sharp and quick, akin to the letter ‘V’. Yet, the 2008 Great Recession, the severest global contraction since the Great Depression, has not been followed by such a steep recovery.
The euro crisis continues to weigh on investors’ minds, as they seek to determine which sovereign bond funds remain risk free.
The results of the Irish bank stress test results, exacerbated by the full revelation of Portugal’s debt, have undermined the confidence of some investors, while others take this disclosure as an opportunity.
We believe current arrangements are still insufficient to ensure a neat outcome to the euro crisis, but we also believe leaders in Europe are inching closer to adopting the necessary measures to prevent a messy conclusion.
Until an adequate solution is crafted, European dominos will still teeter from time to time and markets will be buffetted.
Inflation remains a key watchword, particularly in the UK. Despite the Bank of England’s assurances all through last autumn, inflation is not only above its 2% target – it is continuing to rise.
The Bank risks losing credibility and is well aware of this. Previous talk of more quantitative easing – and the Bank has presented compelling evidence the factors behind this higher-than-expected figure are beyond the control of monetary policy.
We find their arguments credible. The UK is a classic small open economy.
It is what we call a ‘price taker’ on global markets. Rising prices for energy and other commodities combined with weak sterling essentially ‘import’ inflation into Britain.
Add the government’s VAT increase and you have a number of obvious reasons for these high inflation numbers.
Source: http://www.investmentweek.co.uk
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