Newton's outlook on economies and financial markets

Within this broad picture, however, we have expected that, as policymakers sought to counteract the effects of deleveraging with highly accommodative policies, investor sentiment could oscillate wildly. At one moment, sentiment would be framed by concerns about deflation and recession, while at another it would be affected by anticipation of the inflationary implications of sustained economic strength. This 'minicycle' environment is one which we have anticipated could last for many years.

Since the first stages of the global credit crisis in 2007, our expectations have broadly come to fruition: 'risk-on' phases of cyclical enthusiasm have tended to be followed by 'risk-off '' periods in which intractable structural challenges, caused by the surfeit of debt in many major developed economies, have reasserted their influence. Thus far, 2011 is proving to be no exception: data indicate generally that economic growth is anaemic in the West and moderating in higher-growth, emerging economies.