London, 10 December 2009

Latest "Global Outlook" research forecast calls for above-consensus growth in early 2010, cautions on market concern over 
policy stimulus withdrawal  Barclays Capital, the investment banking division of Barclays Bank PLC, today said in its latest flagship quarterly research publication, Global Outlook.

Beyond the Recovery Trade, that while unusually low policy rates and definitive signs of economic growth in developed countries should sustain markets in the short-term, above-consensus US economic growth in Q1 2010 could trigger concerns over policy tightening.

Barclays Capital is thus recommending investors keep recovery trades in place for now, but to be especially alert for signs of change in the current liquidity-driven environment. 

"While global economic growth will continue in 2010, the uniformly favourable environment for asset prices is likely to change in the first half of the year," said Larry Kantor, Head of Research at Barclays Capital. "The pervasive impact of cyclical swings on markets is likely to give way to issues such as the exit strategies to be taken by central banks and regulatory responses to the financial crisis. Signs that policy tightening is imminent would suggest that investors should reduce risk and diversify their positions."

Major themes of Barclays Capital's Global Outlook include:

• Recovery trade in its final phase: when US unemployment starts falling, the course of Fed policy is back on the table

• Money market rates, the US dollar and gold are most sensitive to monetary tightening

• Valuations in equity and credit are no longer compelling, but policy tightening is unlikely to signal a bear market

• Despite declines in risk premiums, emerging markets remain attractive as medium-term investments

Ends --