Investment Management Outlook - February 2012

World

Markets riding a wave of liquidity

Global equity markets have made a positive start to the New Year driven by improving investor sentiment, a steady flow of encouraging economic data from the US and a wave of liquidity in the form of the ECB's LTRO manoeuvre. The volatility that plagued equity markets in 2011 looks to have eased somewhat and markets appear to have already absorbed a lot of the negative news flow.

The US economy showed stronger growth in Q4 and there is a hope among investors and policy makers in the Western world that the economy can act as a locomotive for global growth as many developed nations contemplate climbing the long, uphill road to recovery. The IMF has lowered its global growth forecast for 2012 to 3.3%, from 4% in September, with Europe to enter a 'mild recession' shrinking by 0.5%. Indeed, the IMF has identified a potential global financing need of $1trn in the next few years, with managing director, Christine Lagarde, calling