I attended a seminar this week where the speaker was stockbroker and multi manager Justin Urquhart-Smith of 7IM. He used a good illustration of where the UK economy is right now. He likened it to a bonfire with fairly damp wood where we were throwing lighted matches at it hoping it would catch alight. If it takes and starts to burn them we will be fine in the long run but we could be throwing matches at it for a long time before it catches alight.
Justin said that China is now the engine of world growth. However we should not forget that China is still largely a peasant agricultural nation. China’s economy is growing because of demand from the western nations so it is in China’s interests to see the US and Europe recover from recession as soon as possible.
Justin likened China to the distillery and the US to the alcoholic. This is the big relationship in the world at present and will determine how things turn out for us all. Although there are some serious conflicts between the two nations they both realise that they need the other.
The UK is no longer a world power and even our currency at less than 3% of world reserves can no longer be considered as a reserve currency. We are still the 4th, 5th or 6th largest global economy, depending on the way you look at the figures, but we are now weakening. However, he firmly believes that Britain will recover over time as we have a great resource of good small dynamic businesses. This makes our economy far more flexible than that of our main European partners and is the main reason that we should resist joining the Euro.
The G20 nations are clearly now the drivers of the world economy. This means that UK investors should be prepared to allocate a much larger proportion of their investment portfolios to the Far East and the emerging economies generally. The old adage “Go West Young Man” is now not the best advice for investors, but “Go East” as the transfer of influence is now clearly in that direction.
For any potential investor in the stock markets Justin believes that there is only really one question – “Will the world economy be better in five years’ time?” If the answer is “Yes” then potential investors should at least be drip feeding their money into the markets now. In fact Justin was very clear that in his view the current situation is a “once in a generation opportunity”.
If you would like to find out how the Arch Investment Proposition can help you take part in this once in a lifetime opportunity please look at our website and click on the link to the Arch Investment Proposition and when you have read it by all means get in touch.