Credit Fall Out Hits Markets
After 2007, investors are looking at 2008 with apprehension. The last
few months have seen the collapse of the US sub-prime mortgage market,
the credit crunch, and the first “run” on a UK bank for over a century.
Speculation over the severity of the fallout continues to dominate
headlines.
Across the board, the credit crunch has led to a sharp increase in the cost of borrowing which has stalled merger and acquisition activity. Although many companies are in relatively strong financial shape, some – particularly smaller companies – may find tighter credit conditions hard. This could lead to job losses and higher unemployment figures. On the consumer side, a booming housing market had given UK homeowners confidence. However, data from the Christmas period is already indicating problems with consumer spending as general retailers in particular issue downbeat reports and even profit-warnings.
As a result, sentiment amongst equity investors has taken a further knock. Nevertheless, the corporate environment remains in relatively good shape but selectivity and realistic expectations will be important. Any further bad news could meet with a disproportionate level of disappointment, but it is worth remembering that stock markets tend to be driven by irrational fear, not logic. The key is to stay calm, think long term, and be selective. In the words of Franklin D Roosevelt, “the only thing we have to fear is fear itself”.
In This Issue
- Editor's Note
- Employee Focus
- Credit Fall Out
- Use It or Lose It
- Pensions & ISAs
- Did You Know?
- Start Early
- Are ISAs Tax Free