Modified Rapture as we go into 2010

Modified rapture seems to be the name of the game as 2009, a year of highs and lows, draws to close.

“Evidence suggests the European economic recovery is underway,” says Gary Clarke, head of European equities at Schroders, nicely catching the sober trend. “Following aggressive cost cutting, European companies are well positioned to deliver positive earnings growth in 2010 and European valuations are not looking stretched. However, public sector debt and rising unemployment may act as headwinds.”

Looking globally, HSBC takes an even more subdued tone. “As consumers and governments continue to pay down excessive debt levels, we believe unemployment will add a further check to consumer spending growth,” says the bank. Uncertainty on the strength and sustainability of recovery should keep pressure on volatility levels in 2010.”

Meanwhile, Brian Rogers, chairman and chief investment officer, T. Rowe Price, reminds us that when bubbles burst, it’s critical to remember that “This, too, shall pass.” However, he also cautions that: “There is another bubble waiting for us somewhere down the road. We don’t know what it will be and when it will burst, but we all need to be aware that bubbles do not continue to expand indefinitely.

And what of emerging markets? Jerome Booth, head of research at Ashmore Investment Management says they’re starting to look like a safe haven.

“Given the risk of a double dip and further sharp deleveraging, emerging market (multi-country) asset classes are arguably now safer than their equivalents in developed countries,” Booth comments. “Emerging countries have a wide range of policy tools to cope with further external shocks or other economic problems.”

Well, we shall see.

To end on a high note, our number-crunching friends at Lipper FMI report the largest inflows since April 2009 in their December statistical analysis, which is based on October data. Total net flows reached €35bn, with €28bn of that money going into equity and bond products. The group with the largest flows was BlackRock – quelle surprise – and commodity funds registered the most interest.

Finally, let’s hear it for the fund of the decade. Russia’s been up and Russia’s been down, but those enterprising Swedes at East Capital ended the decade ahead. The East Capital Russian Fund is fund of the decade according to table compiled by Morningstar having returned 1,523% in US dollar terms- 561% more than its nearest rival.

Happy, Good New Year!

Fiona Rintoul, Editorial Director
©2009 Funds Europe