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In Vino Veritas : In Vino Veritas Preview
Investors may fnd themselves reaching for their umbrellas this year as the storm clouds that gathered over world fnancial markets in 2007 threaten to break. The possibility of a US recession is weighing heavily on global economies. While "decoupling'' - or a belief the rest of the world has become less dependent on the US - was the buzz word of 2007, analysts believe any slump in the world's biggest economy will still have a global impact. "For Australia, it is the indirect effects of a US recession that matter most,'' Commsec chief equities analyst Craig James said. "That is, the effect where US businesses and consumers spend less, leading to less production in China and, in turn, less demand for resources in Australia.'' AMP Capital Investors chief economist Shane Oliver said the high risk of a US recession, along with the fact the share bull market is now into its ffth year, means “the investment outlook is shrouded in a higher degree of uncertainty than has been the case for some time''. While he believes 2008 is likely to see weaker global economic growth and plenty of volatility in the local market in the frst half, “lower global interest rates should help ensure reasonable, but constrained, investment returns overall''. Despite the overseas woes, the outlook for Australia remains solid with forecasters still confdent a resources-hungry Asia will help insulate the domestic economy from a US slowdown. However, not all economists are so optimistic. GoldmanSachs JBWere economist Shamubeel Eaqub last week issued a bearish commentary on the Australian economy in which he forecast growth to slow to just 1.1 per cent. "The outlook for economic growth remains weak in our view,'' he said in the report. "The domestic economy will continue to slow as the impact of tight monetary policy, slowing net migration and higher petrol prices lean against the economy ... we expect the domestic economy to run out of steam.'' Debt-inspired pain is likely to emerge as a big theme, especially as the full impact of last year's rate hikes hits consumers and retailers. The forecast slowdown in consumer spending may affect the prospects of national retail chains such as David Jones and Harvey Norman. Banks such as ANZ, Suncorp Metway and St George may also come under severe pressure as borrowers struggle to meet higher interest charges. RELATED LINKS: CALCULATOR: Sort out a new savings plan for 2008 with our simulator INVESTING GUIDE DO YOU NEED A FINANCIAL PLANNER: Here are the 5 steps to follow Testing year ahead for investors HOT STOCKS OF 2008: The Leading Analysts have given Inside Word on the hottest stocks for 2008 Wealth Creator Available at leading Newsagencies or by Subscription at www.wealthcreator.com.au FINANCE 19
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