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Recovery delayed but not destroyed

Fund managers are optimistic about the prospects of recovery on global stockmarkets, despite the terrorist attacks.

The FTSE 100 and the Dow Jones indices were both down by almost 6 per cent at the start of this week in reaction to last week&#39s devastation.

But while fund managers expect many individual sectors, such as airline stocks, to be hit hard by events in the US, most believe that the drivers which were set to lead an overall global recovery are still in place.

SG Asset Management US fund manager Sam Mercer-Nairne was last month predicting a strong US recovery within the first quarter of next year and now he is predicting only a six-month setback.

Mercer-Nairne says: “We have broadly the same outlook as before, although a little bit more extreme. We believe the recovery will now be delayed around six months and the slowdown will be deeper and more protracted. But we do not think this will be the catalyst which will send America into a tailspin.”

He concedes that the effects of President Bush&#39s $500 tax rebates are now likely to be lost. But factors such as interest rate cuts and increases in Government spending will all eventually lead to the economy&#39s upturn.

Jupiter head of investment trusts Andrew Watkins believes that with markets at a low, investors would do well to start thinking about moving back into equities. While he concedes that markets may remain volatile for the coming weeks, in the longer term he says equities will far outstrip the 2 or 3 per cent that is available from cash investments.

He says: “If there can be an upside to this crisis, it may be that it could act as a catalyst to turn the markets and world economy around. We are not at the top of the market, we are at the bottom and I am convinced that the Americans are going to want the world to see that they will not be defeated.”

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