ASSET ALLOCATION: Positive environment will favour equities as the economy recovers

The recovery we have seen has been based on a more positive outlook for the global economy.

The possibility of systemic failure of the global financial system has receded due to unprecedented actions by policymakers in many countries. This has left a more normal economic cycle, albeit a very deep one with the continuing effects of the banking crisis. Looking forward, it is the speed, scale and breadth of the economic recovery that will determine the fair value for various asset classes. Almost all major economies have now exited recession but imbalances persist to prevent a uniformly strong recovery. Heavily indebted countries in the developed world will have to address thei...