The UK will see further turbulence in stock markets for up to two more years, Ted Scott, manager of the F&C UK Growth & Income fund has predicted.
With reports of an economic slowdown and rising inflation limiting options for further rates cuts, Scott has said it could take up to two years for the UK economy to really recover.
“Usually recessions last around 18 months and we haven’t entered into recessionary territory yet,” he says.
Equity markets will suffer severely as a result of rising inflation and a slowing economy, he argues.
“The rally in equities that followed the rescue of Bear Stearns is typical of a bear market.
"People saw the bailout of the US bank as a turning point in the credit crisis and markets went up around 14%, but there was no substance to it."
Scott adds that bond markets are currently predicting inflation to rise by 3.5% or 4%, which will affect ratings and therefore, equities.
“The credit crunch is spreading out into the wider economy and the outlook for equities will remain challenging,” he says.
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