IT HAS been a nervous start to the year for equity markets. This has been put down to China's tighter monetary policy, which is likely to slow Asian growth; the lethargy of American consumers; a jobless United States recovery; the fiscal problems in Greece, and even a delayed "December effect" of profit-taking at the end of the 2009 calendar year.
I am not as pessimistic about these factors as some commentators. However, rising sovereign risk, as typified by recent events in Greece, is certainly cause for concern.
Equity markets finished 2009 on a strong note. That was largely in response to improving global financial conditions, with key emerging markets growing.
In developed markets growth is typically strongest in those with the most economic flexibility; for example, the United States, which has lost 8.4 million jobs since January 2008.
Other economies such as Britain and Spain are less flexible and have been slower to move from recession into recovery.
We know that part of the problem in developed markets is too much debt-fuelled consumption. Essentially, years of over-consuming now need to be followed by a few years of under-consuming.
wholesale colthingIn countries like the US, the recovery really needs to be export- led. Consumption should only kick in further down the track on the back of improved export income.
Chanel Replica HandbagsGross domestic product figures for the December 2009 quarter showed several promising signs - net exports were positive, business investment strong, consumption and residential construction weak. Another 10 years of those trends and the US might even find itself properly rebalanced.
Weak personal lending figures and a higher household savings rate are further signs of the US rebalancing. Sure, these mean a slower recovery, but that is good because it means the labour market will take longer to recover than in a "normal" recession. That said, concerns of a jobless recovery are premature. It is simply too early to expect strong job growth.
Economic rebalancing means the new jobs will not be the same as the old jobs. Car workers in Detroit already know this. There is a risk that we will see higher structural unemployment and skills shortages emerging at the same time.
I was pleased to see China tighten its monetary policy recently. Last year some pundits were concerned about a bubble forming in China asset prices. This year, a number are concerned about tighter monetary policy and slowing growth.
In my view, the tightening in China reduces the risk of asset bubbles and will, hopefully, lead to a more sustainable period of growth.
The one recent event causing genuine concern is the fiscal situation in Greece. Private sector debt crises are often followed by sovereign debt problems. The public sector bails out the private sector but no-one is left to bail out the public sector except the taxpayer.
Getting fiscal policy on to a sustainable path is hard work. It is even harder in some countries because lower standards of living will become obvious as fiscal belts are tightened. Politically, the policy pathway can be fraught.
The bottom line is that economic recovery is going to be hard work. The early signs are positive but it's too early to replica balenciaga handbags expect anything more. Indeed, even as the huge stimulus measures put in place over the past
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