City Watch: Brian Tora on hopes for a post-Olympics ‘feel-good factor’
WE HAVE exceeded our expectations at the London Olympics and markets have bounced back in a comforting fashion.
Yet there is still plenty of doom and gloom about – much of it over the state of our economy. Could it be that we were talking ourselves into a prolonged recession but that this might be reversed as a consequence of the feel-good factor engendered by our success in Stratford?
So far as the economy is concerned, the news has been far from good. High street spending was hit by the poor weather earlier in the year, although there are indications that it picked up once summer finally arrived. We’ll know more when retail sales figures are announced this Thursday.
Then there is the overhanging uncertainty over what is likely to happen in Europe. Once again we will have a steer this week, with provisional figures for economic growth – or lack of it – due out for the single European currency zone later today.
Also today we will be seeing inflation numbers for the UK. One advantage of a weak economy is that it should exert downward pressure on the rise in the cost of living.
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However, this is not necessarily a good thing. In Japan, sluggish growth led to deflation, which in turn depressed economic activity.
But the market has had more of a twinkle in its eye recently, so what might it know that we don’t? The mighty US remains on course to engineer an albeit modest recovery while perhaps success at the Olympics has re-energised the British attitude to business.
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After all, if we can beat forecasts here, why not elsewhere? And if we can, maybe market confidence is not misplaced.
: : Brian Tora is an associate with investment managers JM Finn & Co