Transition to tighter fiscal policy the key to health of equities

Six months ago, the prospect of a collapse of the global financial system appeared alarmingly plausible.

The FTSE All Share reached lows last seen in 2003 and had declined by over 40% during the previous year. Since then, however, a rally surpassing the expectations of all but the most optimistic analysts has seen the same index rise by over 50%. The recovery in equities has been driven by the speedy response of both governments and individual businesses to the crisis which, for spells last year, paralysed both financial markets and industry in general. By and large, companies proved quicker to adapt during this downturn to a drop-off in demand than during previous recessions. Whil...