W-Shaped Recovery – part 2

Date: February 10, 2010

Read Justin’s previous post A W-Shaped Recovery

I posted my thoughts on a weak, possibly W-shaped, recovery and its affect on asset managers only two weeks ago and it seems the news has suddenly gone all bad on the economy.

The first tell-tale sign that we might have a double dip recession is the weak consumer demand in UK in January and abroad the collapse of Greek credit has caused panic in the markets. This is going to put the cost of money up as investors demand more for greater risk and it will affect the UK considerably.

The housing market has experienced a slight strengthening but only because there is so little supply and people can still get very cheap mortgages. If rates go up (and they surely will) supply will certainly increase and demand will drop. As the cost of houses is still well above the long term average a further fall remains possible and stagnation probable.

So with all this misery, is it still good to be an asset manager?

I believe it is, provided that your business has the right products for your market. These market conditions are perfect for demonstrating the valued added of real fund managers. When markets just go up, a tracker fund is cheaper, but when markets go up and down, only the shrewd can buy and sell so as to take advantage of market movements to make money.

With UK savings rates going up, tax credits on pensions gone and government debt out of control people are looking to plan for their future more than ever. That means they need a good fund manager.