Investment comment
January 2009
Economic and market background
Unlike cinemagoers, most investors enjoyed no Quantum of Solace during the final quarter of 2008 as, with the exception of government bonds, asset markets remained highly volatile. Investors were already weary from the credit 'crunch' and from the continuing 'deleveraging' by distressed sellers that it has spawned. In the fourth quarter, they sought to come to terms also with the mounting prospect of a potentially deep and protracted global economic downturn and with the attendant risk of deflation in the developed economies (heightened by the collapse in the oil price since the summer). Terrorist attacks in Mumbai, bloodshed in the Gaza Strip and the revelation of a purported $50 billion fraud by US hedge fund manager Bernard Madoff heightened investors' sense of unease.
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