The global markets remain highly volatile and values have fallen further this week. This is primarily driven by fear that it will take longer than expected to return to economic growth. The media glibly use terminology that is highly inflammatory and loaded with sensationalism. The reality is that we are in a global recession, we have not and had not left this behind us. The graphs may suggest a “double dip” but in reality this is merely a valuation chart and little more. The economic data has been weak and I think we are all aware that Governments around the world have also been somewhat insipid in their ability to restructure economies.

When I was on my holiday in America in July/August I was struck by the general folly of American politicians and the lack of retail activity. Admittedly my ad hoc sampling of the shopping experience (which was deliberately limited) was hardly scientific, but I was struck by how few shoppers there were. Consumers are generally very concerned about budgets and affordability (not before time!) this filters through to slow retail sales and lacklustre growth.

The current turmoil is sadly a reflection of a lack of faith in the ability of economies to recover quickly or Government’s to make a difference quickly. Gold has continued to be a “safe-haven” and prices continue to rise making it expensive. Cash is currently providing a guaranteed loss (interest rates below inflation rates) so investors are stuck with what appears to be a lose-lose choice. Bonds are normally a helpful low risk investment, but essentially being issued by Governments, remain a risk due to the ability of Governments to meet their liabilities.

What will help? frankly reform of the system – particularly the tax system which needs to properly address the question “how do you raise tax revenue without alienating the population and dis-incentivising them?” Answers on a postcard please.

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