UK - Equities will fare better than bonds in the current global economic climate, Standard Life Investments predicts.
It states that the net effect of the current fiscal situation on leading economies is for a shift from a nominal surplus of around 0.3% of GDP in 2000 to a deficit of 2.2% of GDP by 2003.
This deficit will provide a fiscal stimulus that will provide a boost for equities ahead of bonds as a sustained upturn in the global business cycle occurs.
Head of global strategy Andrew Milligan said: “Such a sizeable fiscal stimulus - building on already very successful monetary decisions - will have an impact on bonds markets, as seen in the shape of the yield curve.”
He added that yields will rise on bonds due to greater competition between gilts and corporate bonds as governments increase borrowing. But in the US and UK the effect of this is likely to be tempered by pension funds switching from equities into bonds and thus creating greater demand.
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