02/08/2007
Scotland on Sunday Article
Andrew Milligan, 2nd August 2007
These are dangerous times – the largest credit event since the Russia/Long Term Capital Management incident in 1998. In the short term financial markets could come under further pressure. More forced selling is expected as hedge funds and investment banks discover the (rather lower) true value of many of their assets. Tighter lending standards means the firepower for further M&A and private equity activity is constrained. During market turmoil, then a disciplined investment process is essential, like our 'Focus on Change' approach.
Two points reassure us about the current situation. Firstly, a lot of bad news is now in the price, whether a surge in corporate bond defaults or a recession in US profits. Stock market valuations are increasingly attractive, both in historical terms and in relation to the relative rewards between gilts and equities. Secondly, the global economy remains solid, as strength in Asia and Europe offsets the undoubted weakness in the US. Indeed, the IMF recently upgraded its global growth forecasts to 5% for both 2007 and 2008. Companies are pushing through productivity improvements, enabling earnings growth of some 10% a year. Yes, at the end of this crisis riskier borrowers will face more expensive credit, but the tap remains open for mainstream borrowers, companies and the man in the street.
Andrew Milligan, Head of Global Strategy, Standard Life Investments
Standard Life Investments Limited, tel. +44 131 225 2345, a company registered in Scotland (SC 123321) Registered Office 1 George Street Edinburgh EH2 2LL.
The Standard Life Investments group includes Standard Life Investments (Mutual Funds) Limited, SLTM Limited, Standard Life Investments (Corporate Funds) Limited and SL Capital Partners LLP. Standard Life Investments Limited acts as Investment Manager for Standard Life Assurance Limited and Standard Life Pension Funds Limited.
Standard Life Investments may record and monitor telephone calls to help improve customer service.
All companies are authorised and regulated in the UK by the Financial Services Authority.
©2008 Standard Life Investments.
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