Finance

Merrill Lynch
predicts 2009
Low risk assets could offer private investors the best
prospects of attractive returns in 2009 as the world’s
leading industrialised nations face recession, according to
Gary Dugan, the author of Merrill Lynch Global Wealth
Management’s Year Ahead 2009.

W W
ith governments around the
world striving to tackle the
economic crisis, private inves-
tors could find value in a cautious approach
towards asset allocation. Options include
high-grade . industries, in the view of Gary
Dugan, Chief Investment Officer of Merrill
Lynch Global Wealth Management in Eu-
rope, Middle East and Africa (EMEA).
Governments are expected to play a
pivotal role in tackling the economic crisis,
using tax cuts and public spending to spur
world economy,” says Dugan, “Government
intervention will play a critical role in deter-
mining whether we experience a relatively
short and sharp downturn – which could
draw to a close within the next 12 months
– or a long and lingering recession such as
that experienced in Japan in the 1990s.”

growth. Governments will have to strike a
delicate balance between promoting growth
through public spending and resorting to
excessive borrowing.
“It’s going to be a decisive year for the
GOVERNMENT
INTERVENTION DECISIVE
Governments may have to consider signifi-
cant fiscal packages worth between 2 to 5
per cent of gross domestic products (GDP)
to help kick start their economies and boost
flagging consumer and business confidence.
“Investors will look to long-term US
government bonds as an important ba-
rometer of the progress of global recovery.
Sharply rising bond yields will show that
the governments have overspent,” observes
Dugan. The policy response of governments
globally to the crisis, however, could prove
decisive in determining the length and se-
verity of the downturn.
“Policymakers will have to offer effective
fiscal packages to stimulate their economies.
The seeds of recovery could be sown in 209
but if they fail to germinate we could face a
multi-year recession,” he clarifies.
THE RISK OF
GLOBAL DEFLATION
In addition to a continued unwinding of
high levels of borrowing and further profit

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