Wealth management: Proceed with caution
For long-term investors, last year's turbulence has rendered many assets cheaply valued compared to history. However, there are tactical risks, and the immediate outlook will be governed by a tussle between negative economic news and the hope that the policies adopted will create a better 2010. After the market dramas of recent months, how do you set a medium-term investment strategy to take advantage of the resulting opportunities?It is hard to believe that less than four months have passed since Lehman Brothers filed for bankruptcy. The 'event shock' of the succeeding weeks, when the inconceivable seemed to become the inevitable almost daily, caused businesses and private consumers to cut back, leading to a slump in new orders and economic activity.The authorities' reactions have been threefold: reduce the cost of borrowing; increase the supply of liquidity to banks; and boost spending. Although there are some signs these measures have stabilised the situation, it is not yet clear whether enough has been done to restore the flow of credit needed to sustain economic growth. Fears remain that the retreat from leverage in the indebted 'Western' economies will outweigh growth from emerging economies, leading to a prolonged slump.
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