Year of deleveraging ahead, says Iveagh’s Wyllie
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The biggest deleveraging story of all is only just beginning, says Chris Wyllie, the chief investment officer for private investment house Iveagh.
The US government’s attempts to bring down its financial leverage will continue into 2012 and could test global investors to the point where US equities end their three-year run of outperforming Europe, says Wyllie.
Greece’s inevitable departure from the euro will prompt a “selling climax” before the floor is found and a rally is sparked, he says.
“The biggest policy mistake of 2011 was to squeeze European bank balance sheets whilst squeezing public spending and the growth consequences of this will reverberate around the world,” says Wyllie.
Despite this, Wyllie predicts that it will be China who delivers the biggest disappointment, “taking centre stage when it comes to worries about global growth”.
The primary casualities of a looming global recession will include sterling and commodity-related currencies such as the Australian dollar as well as gold, he adds.
The dollar meanwhile, is expected to “soar” based on the upcoming US presidential election, says Wyllie, leading to worries that Fed action may become “inhibited”.
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