Reversal in liquidity issue points towards knock-on equity rally

One step forward, half a step back. This is how we anticipate the rhythm the UK economy will be into 2010.

At this juncture, economic data has improved – most notably consumer confidence and housing data – but the outlook remains weak. There is an opinion that the US economy is bottoming-out: a pick-up in economic activity and encouraging second-quarter results are promoting overall positive sentiment in equity markets. Risk appetite has risen. However, there is still a sense that investors are looking for meaningful direction. Indeed, to the end of June, the FTSE All-Share index has risen by around 21% from its March lows, and we now think there is some room for profit-taking on the sl...