Summary Following last month s tragedy in the US, Fed Chairman Greenspan commented Nobody has the capacity to fully fathom how the tragedy of September 11 will play out . Resilient consumer spending, until recently the single most important prop to the global economy, is certain to be hit. But earnings forecasts are being hit short term. The oil price has tripled since its low point in 1998.
Inflation is low and economic activity patchy.
The threat from the oil market is real but in our view lower than it has been in past crises. Conclusion Firm conclusions are impossible and uncertainty is anathema to investor confidence. But there is some comfort in the answers to all the above three questions. We believe 11 th September will have accelerated both the down turn and the recovery which is now more likely be V shaped. To sell equities at such times has usually been a mistake.