Profitability and cashflow healthy as M&A picks up

ASSET ALLOCATION

Global economic growth is arguably exceeding expectations of only six months ago with the OECD upgrading global growth expectations for both this year and next.

Corporate profitability and cashflow is also recovering strongly and generally exceeding analyst expectations, while prior dividend cuts are likely to be at least partly restored in 2011. Set against this, we find a world where some of the momentum in economic activity is coming off the top and we face a period where the global pressures to reduce sovereign debt is likely to manifest in lower aggregate levels of demand for years to come. Such sovereign debt concerns are clearly dominating investment sentiment at the moment, but generally, companies with certain exceptions find themselves...