The second half of this year will see further market volatility, while full recovery in the UK economy may not occur until mid-2010, according to Ted Scott, manager of the F&C UK Growth & Income fund.
With the slowdown gathering pace and the scope for interest rate cuts rapidly diminishing, he said: "Usually recessions last around 18 months and we haven't entered into recessionary territory yet." Scott explained that the prospect of stagflation was "deadly" for equity markets: "The reason why equity markets did quite well in the 1980s and 1990s was that the economy was pretty stable, showing steady growth and low inflation. Bond markets are now effectively saying that they expect inflation to go up to 3.5 or 4pc and that's bad news for equities because it affects ratings." He added:...
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