A watershed for the global economy?

Increasingly critical investors are crossing more and more items off their shopping lists - could the dollar soon join them? Jeremy Batstone-Carr explains why we are at a critical juncture.

When sifting through the winners and losers in what may still turn out to be the eye of the storm on the world's financial markets one of the most remarkable stand out features has been the strength of the dollar. Clearly the knee-jerk reaction from investors to ongoing concerns regarding the health of the world's financial system has been an apparently sharp reduction in risk appetite which has manifested itself in what might strangely be described as a "flight to quality" including short dated US Treasuries and the dollar.

But where do we go from here? A return to the aggressive equity bull market conditions of the past four years seems fanciful given the extent to which the derivatives market has lost face. With the likelihood that more bad news continues to seep out of the banks and other financial market operators, apparently attractive valuations may yet count for not very much in a more wary world.

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