World
Equity market resilience in the face of
triangulation of concerns
Markets are currently encountering a triangulation of headwinds.
The first concerns US monetary policy. After experiencing fierce
criticism post the commencement of QE2, speculation has grown that
the Federal Reserve will curtail the bond purchase programme. This
is extremely unlikely, and QE2 will continue until the objective of
higher core CPI and employment have been achieved.
The second concerns fears that the interest rate tightening
cycle in China will produce a hard landing for the economy next
year; this has resulted in a 10% correction in the equity market.
Again these fears seem overstated. Higher rates are designed to
curb excessive speculative credit and not radically change the
growth trajectory.
