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the drums of war had wiped out most of the post-October gains. What the IMF calls “heightened risk aversion” has driven investors into so-called safe havens – gold, cash (in this case the Euro and Swiss Franc, rather than the dollar) and government bonds.
Time to buy?
Yet, in truth, no-one knows exactly what represents a safe haven any longer in such uncertain, indeed unusual, times. Investment decisions are complicated not just by the multifaceted nature of the crisis, but its uniqueness – there is no parallel in recent history.
Despite this, some analysts believe now is the time to buy. This darkest-hour-is-just-before-the-dawn strategy is based on the fact that market fundamentals, such as price-earnings ratios, have returned to their historic norms. If – and it is a big if – Iraq is either disarmed peacefully or as a result of short, successful war, the stage will be set for faster global recovery. At the same time, market sentiment will have improved out of all dfgdgfdgfddgdgfd |
recognition and equities will regain some of their 1990s momentum.
The future is a different country
In effect, this assumes that the future will be like the past – that the global economy and global stock markets will perform over the next seven years as they did in the nine years after the Gulf War. Comforting though such a scenario might be it ignores the stark reality that the world of 2003 is very different from that of 1991/92. Recall that in 1992 Japan was still the global economic role model that all industrialized countries wanted to emulate. No longer. A decade of sluggish growth and now, deflation, with a financial sector crisis to boot, means that Japan is the sickest man in the OECD economy.
Furthermore, the 2003 crisis is not just about possible war with Iraq. It is also about the stalled Middle East peace process, North Korea’s revived nuclear programme, the also-stalled Doha talks on trade |
