The US indices tumbled after the IMF cut global growth forecasts and warned of frothy equities, amid signs of slowing growth in Europe

Nicholas Forsyth

Market Matters

The US indices tumbled after the IMF cut global growth forecasts and warned of frothy equities, amid signs of slowing growth in Europe. My concern is the warning comes 3 months after the US Fed said prices were stretched in some of small-cap and biotechnology shares. European shares plunged to a 7-week low, as the IMF also scared the markets by stating there is a 25-30% chance the world slips back into recession, a very worrying prospect after US equities have advanced 88% since October 2011, without a 10% correction. The most disconcerting factor is policy makers have wanted to support assets i.e. shares for the last 3-5 years, to help kick start a recovery, so if they want them now to correct in all likelihood, they will. So after plenty of nervous statements, where does that leave us, the investor? I am comfortable to buy into current weakness, especially the battered banks, who will enjoy the prolonged period of low interest rates assuming housing prices do not tumble. (VIEW LINK)


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