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The global economy, bad now but some positive signs

Welcome to the first Oliver’s Insights for 2009.

It is obvious the global economic situation is bleak. The key problem last year was the financial crisis. Given ongoing global bank problems this is clearly still with us, but this year the key problem will be the economic fall out. This note looks at the policy response by governments around the world to the global financial crisis. The key points are as follows:

- The depth and length of the global recession now underway will be the key determinant of how shares and other growth oriented financial assets will perform this year. A big driver of this will be the success or otherwise of the global policy response now underway.

- Compared to the 1930s, the global policy response this time around has been far more positive and far quicker. So another depression is extremely unlikely.

- It is early days and the financial crisis is continuing but some key signposts to economic recovery are showing tentative signs of improvement.

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