View more on these topics

Pressure points

The global economic picture continues to fascinate and four questions are central to the outlook. First, how impaired will the banks prove to be? Second, what will the world’s monetary authorities do to ease the pressure? Third, how will the corporate sector react to more straitened times and, fourth, who will emerge as provider of end demand to the world, now that the US consumer is taking a rest?

There is no doubt that the deflationary forces unleashed by the credit crunch continue to be felt. Reports on bank lending standards show a chastened sector that is scrambling to shut the stable door now that the horse has bolted. Fortunately, much of the corporate sector is in good health, with only a limited need for external finances. Exceptions are not too hard to find, however, with private equity-owned and commercial property companies being more vulnerable.

The central banks will look on with mixed emotions. Relief that risk is being properly priced again will be counter-balanced by an appreciation that banks need to rebuild their capital reserves after making big write-offs in 2007. They will also be acutely aware that the last thing banks need is another round of defaults following their travails last year. Fortunately, it is within their power to help. We expect that they will continue to lower interest rates to ease cashflow pressures on existing borrowers and do everything in their power to steepen yield curves to allow banks to make low-risk money and rebuild capital.

The reaction of Main Street to events on Wall Street may well define the nature of the slowdown. There is no doubt that companies are becoming more cautious but we question whether business leaders’ worries are resulting in dramatic actions. Guidance for first quarter earnings is being trimmed, not slashed, and in our opinion the jury is still out on whether business confidence is imploding.

Who will replace Americans as the consumer of last resort will take time to answer. It could be that changes in macro-economic settings for either Europe or Asia will signal who is in the process of taking up the running from the US. The International Monetary Fund has indicated that it would like to see a fiscal stimulus in Europe. Currency revaluation in China would leave scope for interest rate cuts and domestic reflation. Ultimately, either or both of these changes probably need to happen to get the world back on an even keel and looking forward to sustained new growth. In the meantime, the US is once again buying itself and everyone else some breathing space by stimulating its economy.

Bill McQuaker and Katy Gladstone are heads of multi-manager at Henderson Global Investors


L&G to launch dynamic bond fund to retail market

Legal and General is launching its dynamic bond into the retail market.The Ucits III vehicle has been a strong performer under the management of Dickie Hodges since its launch back in April 2007 and will be available from March 31, 2008.L&G sales director Ben Waterhouse says: “Access to the dynamic bond trust is good news […]

Friends Provident comes top in e-excellence survey

Friends Provident has come top in an e-excellence survey of providers by the Financial Technology Research Centre.It received a triple e rating in both the Life Protection and Critical Illness Cover categories.Accreditations were awarded following the completion of a survey examining the e-commerce in place to support Friends Provident’s protection proposition.Friends Provident head of protection […]

Free equity-release advice in joint deal

Retirement Plus is testing a joint-venture equity- release service with Stroud & Berkeley Group, Gloucestershire Primary Care Trust and AWD Chase de Vere Wealth Management. It will offer free, independent equity release advice.

Defaqto enhances its suitability letters capability

Defaqto has improved suitability letters within its Aequos Engage software by incorporating a new type of document software.The ATEB Suitability software is a special version of document creation software Intelledox. Defaqto says the suitability report templates it can now issue have proved “extremely robust” in compliance terms. It says when used in conjunction with Intelledox […]

Tax allowances and exemptions

Helen O’Hagan, Technical Manager at Prudential, looks into the planning strategies that can deliver considerable tax savings for your clients. Inheritance tax (IHT) Consider Margaret, featured on our Planning Matters family hub, who is a sprightly eighty year old with four children and several grandchildren. She’s recently been widowed and IHT planning is high on […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm