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Monetary policy not tightening in the near future, QE2

Zak Mir and Bill Hubard, were joined by Ben Gutteridge, Head of Fund Research at Brewin Dolphin, to discuss the outlook for the current global economy.


People looking for higher quality growth stocks

Gutteridge noted that there is a volume issue over the summer, but people aren’t in a value mind-set, the majority still want to attach themselves to higher quality growth stocks. Mir added that mid-cap stocks doing well such as Dominos or Just Eat.

Emerging markets causing global problems

Gutteridge outlined there is a need for caution within the UK economy which is heavily exposed to emerging economies, despite the UK doing well data wise. In terms of the equity market, he outlined that emerging markets and the commodity downward wave mean equities remain exposed, but not all fundamentals are negative. Gutteridge continued onto the US, where he believes the Fed will still move this year for a rate hike despite the situation in emerging markets, supported by the FOMC minutes. He added that when interest rates do go up, the first few hikes won’t see a change in bank accounts, just loan interest.

ECB receive first payment from Greece, whilst EUR/USD not aiding exports in Europe

Gutteridge highlighted the Greek situation, where the ECB have received the first payment today, and now he believes he can focus on other European fundamentals. However, he recognised that Greece isn’t on a path of debt sustainability. He moved on to the EURUSD, which at its current levels isn’t aiding exports, and despite being good for Germany, Gutteridge noted the lower level of competitiveness for peripheral European nations, with also the possibility of the Euro going lower.

ECB monetary policy not getting tighter any time soon

Gutteridge commented that it will not get tighter quickly, but we are seeing signs of improvement, such as Spain’s retail sales increasing and higher employment across the whole of Europe. Mir questioned this, who expects the ECB to come up with QE mark 2. To finish, he outlined that banks will have to move away from moderate lending to a more aggressive stance.


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