The UK is suffering on two fronts as December, and 2009, draws to a close. The snowy conditions are achieving the usual disruption to transport but those problems will ease once the wind shifts to the west and the rain starts again. A greater problem lies in the UK economy where the UK Chancellor has decided to delay reducing the Nation’s outgoings in the hope of buying popularity in the 2010 election.
I sense that, weather and chancellors apart, the UK has a more cheerful mindset than just 12 months ago. That is not too surprising though as stock, bond and commodity markets have recovered strongly through 2009. 2010 ought not to offer the same upside potential simply because we have already had the sharp recovery but, around the globe, interest rates are relatively low which will encourage investors to keep shifting away from cash. Companies’ trading fortunes are generally better although UK investors could well look overseas for some equity exposure as poor UK economic numbers could hold back the stock market.
The UK commercial property market has a tougher way ahead as the banks pull back their support for this sector.
After a strong performance in 2009, corporate bonds have enjoyed their recovery phase and whilst there is a sound yield to enjoy risks to capital values will creep in as and when interest rates rise (although that might not be until 2011 in US, EU and UK).
Emerging markets have performed strongly in 2009 leading any contrarian investor to look elsewhere but the growth expectation in those markets is encouraging.
Overall, 2010 should be a quieter year than 2009 and although shocks can appear we are looking forward to steady returns.
Author: Graham Barnes, International Director
December Highlights
- In US another strong month propels US stockmarkets to new highs for the year
- US Economic news is generally positive, with business activity and retail sales improving
- Eurozone out of recession in Q3
- In Europe Bank lending remains weak
- In UK large cap equities outperform mid – small caps
- Third quarter GDP growth in India reached 7.9% year on year
- Latin American region outperforms but gains held back in emerging Asia
- UK Government bond yields fell marginally
- UK MPC extend quantitive easing by £25bn