Cautious optimism prevails over global equity markets

Many of the conditions that made 2005 a positive year for investors remain in place. January proved a rollercoaster month for global equity markets, but market volatility was driven by stock-specific concerns rather than worries about the broader economic outlook. Economic growth is expected to remain reasonable in 2006, while easing input cost pressures should bring down headline inflation and keep interest rates contained. The Federal Reserve's tightening cycle appears to be nearing its end and the investment outlook will remain favourable provided rates do not exceed 5%. Earnings i...