Bull Market Entering Second Stage
UK equities have jumped from their heavily discounted position at the beginning of the year. We could now be entering the second phase of this bull market with gains coming from mergers and acquisitions and recovery stocks. We feel that we will experience little or no growth in the economy in the next three years given the high levels of domestic debt which we believe will reduce the impact of any recovery.
Consumers have moved away from the habit of borrowing money when ever they want something and banks are aiming to rebuilding their balance sheets and this will have a serious affect on the economy. Investors may want the bad old days to disappear but we may be forgetting economic truth, we are still firmly in recession.
Of more relevance to the UK economy, and therefore the markets, is whether the Quantative Easing policy (QE) is working and how the Bank of England plans to exit it having pumped billions of pounds into the economy. The Monetary Policy Committee(MPC) should detail how they propose to get the commercial banks lending again which is potentially in practice, highly inflationary.
We will wait and see and no doubt feel the pain through higher taxes.
Sorry, comments for this entry are closed at this time.