Are we on the road to recovery?
Investors will need to prepare for turbulent times
The market has looked too far ahead of the curve in pricing its recovery and the fundamental problems within the economy remain unresolved, warns Saxo Bank.
Saxo Bank’s chief economist, David Karsbol says, ‘In developed economies, the consumer has yet to deleverage, and in developing markets, export-oriented economies will require more time to restructure for sustainable growth in the future. Risk appetite has increased in a nearly uninterrupted arc, as markets boldly predict a V-shaped recovery.
‘However, we believe that the recovery will be flat-to-w-shaped and will take at least another 18 months to work its way through lay-offs, write downs and rationalisations.’
In its third quarterly outlook, Saxo Bank warns that irresponsible fiscal policy, creating massive – and growing – public debt, will lead to bond market dislocation.
Karsbol adds, ‘It is no surprise to see strong stock market bounces when the economy, as a result of the outright panic we have seen, has been so depressed. However, the degree and persistence of the rebound in risk appetite has been remarkable and surprised many, including Saxo Bank. Unfortunately, at some point during the next six months, we expect risk appetite to plummet again as the market realises that it has raced ahead of itself.’
‘The main question for the medium term will be long interest rates which, if they continue rising, could create an even more chaotic and volatile market environment than the already ugly one envisioned in the Saxo Bank’s baseline scenario for 2009.’
Karsbol concludes, ‘I would advise investors to fasten their seatbelts and buckle up for a bumpy ride as fear and negativity could make a strong comeback when the summer is over.’
Advertisement
Latest news
UBS launches exchange traded commodity range 11 March 2010
UBS Investment Bank has launched a range of Exchange Traded Commodities (ETCs) on the London Stock Exchange.
- Fidelity appoints director to Anthony Bolton's fund 10 March 2010
- Technological innovations set to boost sector growth 10 March 2010
- Cru Investment director to stand in election 9 March 2010
Recommendations
Top Ten Life Funds
| Fund | Offer | 1y | 3y | 5y |
|---|---|---|---|---|
| UBS Life Structured Credit A | 85.37 | 229.6 | n/a | n/a |
| Skandia Finland FIM Russia | 11.32 | 205.5 | -3.7 | 76.6 |
| Skandia Finland JPM New European | 1.93 | 154.5 | -9.6 | n/a |
| Skandia Finland Alfred Berg Ryssland | 0.86 | 152.2 | n/a | n/a |
| Skandia JPM New Europe | 250.10 | 147.2 | 17.7 | 93.6 |
| Skandia Finland Baring Eastern Europe | 9.93 | 144.5 | -15.1 | 52.4 |
| Canlife SVM UK Opportunities LS4 Acc | 102.10 | 138.0 | -14.4 | 34.5 |
| Merch Inv Sanlam Global Financial S6 | 105.80 | 136.5 | n/a | n/a |
| AXA JPM New Europe | 194.20 | 135.4 | n/a | n/a |
| Zurich Sterling JPM New Europe | 259.50 | 134.1 | n/a | n/a |
Investment funds in depth
US Sector Views: Holding the Line 5 March 2010
Kully Samra, branch director at Charles Schwab UK, gives his view on the US and highlights some sectors for investors to keep an eye on.
- Schroders' UK Equity fund downgraded 1 March 2010
- UK fiscal policy - Mr Mickawber , Scrooge, Dr Pangloss, or St Augustine? 1 March 2010
- Schroders plans Global fund launch 24 February 2010
Guides
Tax tips for pension investors 16 February 2010
With the tax year end looming, investors should make the most of whatever tax breaks are available to them.
- Cater Allen launches five year FTSE product 18 January 2010
- Glendevon King launches Global Bond fund 18 January 2010
- Getting investment trust advice 30 December 2009
Special Offers
- Annual report service
Free access to annual reports and other information
on selected companies


