Emerging markets: Now sell, sell, sell

25th February 2011

However Schroders chief economist and strategist Keith Wade also believes that while there is an inflation risk, the global ‘sweet spot' should continue with the firm still committed to risk assets as a result.

Wade says: "The global sweet spot is the stage of cycle where economic growth is quite strong but there isn't any inflationary pressure coming through, so that means that growth can continue.  That is very good for markets because it means investors can look forward to a sustained period growth and increasing earnings."

Wade says that commodity prices represent a threat to this sweet spot. However in the US, Europe and Japan there is enough spare capacity and little pressure on wages so that should mitigate the inflation threat. The manager is more concerned about emerging markets.

3 thoughts on “Emerging markets: Now sell, sell, sell”

  1. Anonymous says:

    Kim – super. May I add one small point, that of “going with the herd”. If those around you can see the potential (or the positive side), is it more likely that an individual’s intuitive or even gut feelings will be swayed by such momentum?
    Having never been a victim, I don’t know but I do feel that this might colour our judgement. 

  2. Anonymous says:

    Good point – but I’m really talking about individual scams in the article.  When somebody mails you to get their late father’s money out of Nigeria, calls about a wonderful stock tip or offers you a share in a gold mine, your gut tells you it’s a con.  If you read in the paper that lots of people say Enron is a good investment, that US property can never fall or that dot com stock is bound to rise, it’s a bubble (or another Nobel prize winning economist showing that he can theorise, but not stay in contact with planet Earth).  Herds tend to get into bubbles by collectively assuming others have inside information, and hence reinforcing the herd by sharing fictional “knowledge” through share prices, individuals get into scams by individually ignoring their own intuition – usually they know they are scams (as in the article) hence they don’t compare notes and share false information, they just lose on their own. 

  3. Anonymous says:

    Yes, I got well and truly scammed once.   It was by Equitable Life that umpteen hundred year old,
     well thought of, company with a very high rating from Ernst & Young.   I have been very very cautious about anything coming out of London ever since and certainly do not trust rating agencies or government regulating agencies anymore.   Probably a bit of overreaction, but I’ll stick with it.   Now, I ask you, could any one have seen that wreck coming?   Intuition?  Planning?

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