The slight dip in equities at the end of last week was purely a sign of markets pausing for breath after very strong returns this year, and the outlook, particularly for the US, is still very favourable, according to Chief Investment Officer Haig Bathgate. While US gross domestic product numbers on Friday came in lower than expected, that's mainly due to the effect of government spending cuts (known as sequestration) and the economy there is still pretty robust.
In the UK, with both Lloyds Banking Group and Royal Bank of Scotland reporting results this week, it looks like banks may at last be emerging from the financial crisis, and their core businesses are in general operating profitably. While we still don't know the full extent of bad loans on their balance sheets, it's likely that we are through the worst of the one-off losses that have bedevilled the firms for the past few years. Fundamentally, banks need the economy to improve in order to fully recover – with better economic growth, banks are less likely to suffer from bad loans.
However, at present we are still quite negative about the prospects for the UK economy on a relative basis.
Haig, speaking on BBC Radio's Good Morning Scotland, also commented on the earnings outlook for Home Retail Group. You can read a transcript of the interview here.
This content was generated prior to Turcan Connell Asset Management Limited operating as Tcam.