However, we do not expect that this will degenerate into recession. The U.S. Federal Reserve has started the necessary aggressive easing. Other central banks are expected to follow when their local conditions dictate. Restoration of low inflation economic growth in the U.S., and other developed nations, is expected in the second half of 2000. Historically, the adoption of an easing cycle by the Fed has been a good signal for equity markets.
Investors start discounting sales and profits recoveries.
We therefore expect modest equity market gains over 2001. Since we expect superior EAFE markets and currency gains we are keeping our strategy favouring EAFE and Canadian equities.