The Great Debate

from The Great Debate UK:

Signs are positive for markets and economy

SCHWAB.IMG_4329-Kully Samra is UK Branch Director at Charles Schwab. The opinions expressed are his own.-

There is no doubt that since the lows in March 2009 the U.S. market has rallied massively. However, at Charles Schwab we believe that whilst economic progress will continue, we must look to the months ahead with some caution.  We remain optimistic regarding the equity markets in the longer term and the economy in the short term, but recognise that increased volatility will likely characterise 2010.

Over the last month, we’ve certainly experienced a sense of this increase in volatility in the US markets and we would stress the importance of a diversified portfolio and an appropriate asset allocation that matches one’s risk tolerance in order to combat this. Investors should also ensure that they assess and rebalance their portfolios to fit the market conditions.

Despite this, the U.S. economy is undoubtedly still continuing to improve, evident from the initial read on fourth-quarter gross domestic product (GDP) which presented a much-better-than-expected 5.7 percent. Up to this point, the recovery that we’ve witnessed since March 2009 could be described as V-shaped. However, it will become more difficult for data to continue to move in that nearly vertical pattern. This will likely result in at least some flattening in the rate of improvement in the economy at some point in 2010, possibly making the recovery square-root shaped.

One thing that we’re keeping our eye on at Schwab is the increasing debt levels in the US. In the decade to September 2009 it’s taken nearly 6 dollars of debt to create 1 dollar of economic growth. This is clearly not sustainable, and is a threat to the long-term stability of the US economy. To give this some context, in the 1950s, it took 1.36 dollars of debt to create a dollar of economic growth.

Government shake-up?

from The Great Debate UK:

Light at the end of the tunnel for the U.S. economy?

Kully Samra

- Kully Samra is UK Branch Director, Charles Schwab. The opinions expressed are his own.-

The last year was an unbelievable roller coaster ride in the financial world.  In the U.S. we saw the S&P 500 plunge to 667, a 12-year low, in March, and then rise over 60 percent from that low as the economy moved away from the edge of the cliff and started to recover.

As a result tried-and-true lessons were brought to light for investors, including knowing your risk tolerance, understanding what "long term" really means, and the ongoing benefits of diversification and rebalancing.

from The Great Debate UK:

Is it time for investors to look towards the U.S.?

Kully Samra-Kully Samra is branch director at Charles Schwab, UK. The opinions expressed are his own.-

The economic crisis that has prevailed over the global markets in the last 12 months has undoubtedly rattled investors worldwide, but rather than leaving their heads in the sand, seasoned investors have continued to search for opportunities amidst the instability.

One such opportunity that seems to have been overlooked by UK investors is that of overseas share ownership.