Perspectives

As a year of revolutions and riots drew to a close, scientists were reported to have discovered new Earth-like planets, hundreds of light years away.

As we look into 2012, we continue to see significant risks in the global economy, as a result of the continued effects of deleveraging by over-indebted countries.

In many developed economies, a process of deleveraging (debt repayment) is under way which we believe will have highly significant consequences for investors.

It is doubtful that the Kaiser Chiefs had financial markets in mind when recording their 2004 hit "I Predict a Riot", but the lyrics of the song were as fitting a description of events in markets over the summer as of those on the streets of England's major cities.

The dreaded phrase "we will have to let you go" is being used repeatedly in western economies as employers cut their cloth according to the prolonged low-growth environment which many perceive to lie ahead. Could the phrase be applied to a country?

At Newton, we believe our use of themes is invaluable in helping us to gain perspective on the important risks and opportunities in investment markets.

The high yield market fell sharply (by 1.5%) from 1 June to 21 June as uncertainty over the re-emergence of Greek sovereign debt concerns prompted investors to make a swift exit from riskier assets.

A new look at what to do when domestic safe haven markets no longer provide comfort

The coming months are once again full of difficult events and issues for the bond markets. These include the end of QE2, encroachment of the U.S. debt ceiling and the ongoing eurozone crisis.

Following a significant decline in U.S. bond yields in the last quarter of 2010, there are some investors who suggest that bond yields will rise substantially, while others remain more complacent.

The sale of Roy Lichtenstein's Ohhh...Alright painting in New York in November symbolized the prevailing sentiment in financial markets during the closing months of 2010.