What a traumatic period we are going through! It seems that Angela Merkel will take the eurozone to the brink . She has spoken in favour of a fiscal union in recent weeks, so maybe this will eventually allow her to agree to Eurobonds. Fear of future inflation is preventing the ECB from printing money to buy sufficient bonds from places like Italy and Spain to drive down their yields. One way or another it does seem likely that a solution will be found, because a break-up of the eurozone is in nobody’s interest. Unfortunately the solution will not be in time to prevent a recession in the eurozone next year, which now seems inevitable. But the US economy is showing signs of reviving, and emerging markets continue to show high rates of growth, albeit with a risk of inflation still in India. There have been worries about growth in China, but it appears that it may be picking up again, and the longer term story remains intact. Consumer tastes in China for luxury goods and fast foods, for example, are creating opportunities for international companies. The Asian consumer is going to be an important theme for investors over the next 10 years, as will technology. Many companies listed in London continue to report good results, and more importantly valuations are low in the UK and very low in Europe. Why would you buy a 10 year gilt yielding 2.29% when the Top UK 100 Companies is yielding 3.8%? Eventually the mood will change, and when it does there could be a significant rebound in the stockmarket. Indeed, the period before Christmas is often a good one in the stockmarket.
Risk warnings
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