Epochal times in the markets have brought forth ground-breaking measures

Published on Friday 24 October 2008 21:06

IF IT is any consolation to participants in this year's IFA of the Year competition, this has proved an epochal time for financial markets and the world economy, writes Bill Jamieson.

Toppling banks in Britain, Europe and America, gut-wrenching stock market crashes, breathtaking government rescues of leading banks and, across the world, deepening fears that this could prove a deep and prolonged recession.

Over the past few weeks there has been just no respite, adding chilling force to Maynard Keynes' dictum that markets can stay irrational a lot longer that you can stay solvent.

However, remember that this is a set of investment portfolios for a hypothetical client investing on a ten-year time-frame. On that timescale, our IFAs are able to take a long-term view and fix their horizons on a world that will be quite different from now.

Even so, for IFAs and their clients, this year has been one long ordeal, requiring calm nerves and iron determination.

So what possibly could lift the gloom?

Here are three points investors need to bear in mind.

First, governments in America, Europe and the UK have taken action to protect leading banks and this has started to bring down those sky-high rates in the interbank market. That process will be slow and bumpy as the bad recession news piles up – but vital steps have been taken to save the financial world's central nervous system.

Second, interest rates are going to come down sharply in the coming months.

And third, I expect fiscal stimulus packages in some form in the coming six months.

Stock markets are already discounting a very sharp recession around the world. But looking 12 to 18 months ahead we should be seeing the first glimmers of recovery.

And some believe that the end to the storm in equity markets may soon be in sight.

More than 80 per cent of financial advisers are now investing their own money in the stock market with almost half believing that it has bottomed out.

Let's hope that proves the case.