Are we set for another 2011?

ON UK GROWTH

After a very strong first quarter for global equities, markets seem to be hitting some profit taking and investors are asking whether this heralds a repetition of 2011, with equity markets peaking in the spring.

Although it is undoubtedly true that there are still global macroeconomic problems that could upset the progress of the equity market (including a Chinese hard landing, an Iranian blockade of the Gulf and a eurozone implosion), the likelihood of any of these events has been over-discounted and recent policy moves have further lessened the scale of their impact. Chinese inflation has fallen, allowing for looser monetary policy; the US is prepared to release strategic oil reserves; and Saudi Arabia will increase production to offset any tightness in the market. The two LTRO tranches hav...