London, 25 March 2011

“Global Outlook” research forecast recommends a more cautious position on risk, as inflation pressures trigger policy normalization: The global expansion continues, but policy normalization will be a constraint on market performance, Barclays Capital today said in its latest flagship quarterly research publication, Global Outlook: Winding Down the Recovery Trade.

“We are recommending that investors shift to a more cautious approach to markets than the risk-embracing positions we have recommended since the recovery got underway two years ago,” said Larry Kantor, Head of Research at Barclays Capital. “We generally favor developed country over emerging equity markets, particularly the US, where policy is still easing, immediate growth prospects are best and risks are relatively low.”

Additional themes of Barclays Capital’s Global Outlook include:

• The events of recent weeks, in Japan as well as the Middle East and North Africa, should not derail the expansionary trend

• Emerging markets exposure should be focused on currencies and local markets that have not appreciated dramatically, such as Korea

• Avoid government bonds; credit is now basically a range trade

• Inflation breakevens have risen, but remain an effective way to hedge inflation risk

Underscoring the forecast in the latest Global Outlook are the findings of Barclays Capital’s Global Macro Survey, conducted in March and capturing the views of more than 1,000 institutional investors. In the survey, only 7% of investors saw the “Goldilocks” scenario of growth recovery and easy monetary and fiscal policies continuing. Investors in the survey also indicated a growing concern over inflation, though in the case of the US, the majority did not expect inflation to impact Fed policy this year.

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