Oliver's Insights - Economic Recovery
This note looks at the timing of the economic recovery globally and in Australia, how strong it might be, and the implications for shares.
The key points are as follows:
- The improvement in economic indicators is consistent with an economic recovery by year end.
- While tight credit markets and ongoing deleveraging will most likely result in a slow recovery initially (say around 2% growth next year), the severity of the global recession & the amount of stimulus pumped into the global and Australian economies means that a V-shaped recovery (with 5% or so growth next year) cannot be ruled out.
- After strong gains, shares are at risk of a correction and increased volatility in the months ahead as investors start to fret about the strength of the recovery. However, we expect the broad trend to remain up.
