Analysis

ON ASSET ALLOCATION

The earnings results season for Q3 2009 (October-December 2009) has almost finished.

The recovery we have seen has been based on a more positive outlook for the global economy.

All politicians strive for the ‘Goldilocks economy', which is neither too hot, nor too cold, but just right, thus allowing for steady economic growth with moderate inflation.

Chinese money supply and loan growth - at over 30% - is out of control.

There is a danger that comes from the constant bombardment of macroeconomic information - increasing short-termism.

While the outlook for the market remains uncertain, the US recovery is showing clear signs of progression.

We believe some dividend forecasts for 2010 may be too high.

Corporate bonds have recovered strongly over the last 12 months and we believe the recovery has further to run, albeit at a more moderate pace.

While it is undoubtedly premature to prepare the obituary for European monetary union, the financial downturn of the past few years has mercilessly exposed its inherent flaws.