Investment Management Market Report

Global Overview
The recent terrorist attack on America comes at a time of pronounced instability in the world economy. Quite clearly, market expectations and forecasts have been discarded and future expectations are clearly tainted with the increasing likelihood of continued military retaliation by the United States.

Prior to the destruction of the World Trade Centre, we were of the opinion that investment markets would begin to show recovery in the fourth quarter, led by surprisingly resilient consumer spending in the US, and the long awaited impact of the monetary easing adopted by the US, having a positive effect on company earnings. In turn, we believed that we were close to the bottom of the interest rate cycle, and that the US economy would not slip into recession, and that we could expect interest rates to turn during 2002.

As a direct consequence of the terrorist attack, interest rates around the globe are likely to continue falling, and indeed we have already witnessed swift action by the Federal Reserve, the European Central Bank, and the MPC in the United Kingdom in this respect, in an attempt to bolster the falling markets. In addition, there has been a commitment from the US Administration that public monies will be available to support those industries that suffer most in the wake of this atrocity.

A degree of uncertainty hangs over the market, in that it is unclear as to what form or duration any reprisals will take, early attacks suggest military targets as a priority. Expectations for investment growth will have to be scaled back substantially, as it is a central expectation that the struggle against terrorism will continue for some time, and we believe that the economic and financial policies that will ultimately emerge from this period will remain with us for some time to come.

Near term, the focus will be on the stability of Pakistan, and its relations with Afghanistan and others in the region. The Pakistan government has already urged that the reprisals are not long drawn out, as there has already been strong condemnation of the early attacks. We believe the near term deterioration in economic conditions in the US will in time be overpowered by a massive fiscal stimulus. Our expectations would also include a substantial increase in defence spending and a continuation of an accommodative monetary policy, until such time as the economy shows signs of sustainable growth.

To read the press release in full, please click on the icon below.

For those users who do not have the required Adobe Acrobat software installed on their computer, a link is provided below for your convenience.