Calm before the storm as data indicates tougher times ahead

ASSET ALLOCATION

Markets have taken on an air of relative calm following the extreme volatility we saw in May.

However, economic data suggests underlying economies may be about to enter a tougher period. As stimulus measures are withdrawn, the underlying economic strength may not be enough to sustain positive levels of growth. We may have already seen the peak in economic growth for this cycle. It is unclear whether we will see a double-dip, though it is more likely than it looked earlier this year, particularly in Europe. Europe and the US are taking different paths on dealing with the government debts accumulated to rescue economies at the depths of the financial crisis. Europe is now on a f...