'The Magic Mountain'

Up in the mountains around Davos must be a fine place to feel free and reflect upon the trials and tribulations of the teeming mass of mankind below. The World Economic Forum (WEF) and global business and political elites, as is their perennial habit, are heading this week for the Swiss resort to do just that, and engage in a strenuous bout of elevated pondering on the planet's future. This year's Alpine bill of fare will dwell on weighty matters such as wealth, poverty and economic growth with the usual aim of trying to make the world just right.

Much of this year's earnest diagnosis of the health and ills of globalisation and how it is reshaping the world is scheduled to focus on the developing economies. Some in the investment community are sceptical about what is on offer for investors from the economic march of these emerging markets, whether Brazil or Russia, Indian or China, the BRICs, or those of the latest acronym, the MINTs - Mexico, Indonesia, Nigeria and Turkey. The argument runs that the lower growth characteristic of developed economies offer better historical returns for investors over the expanse of decades or a century; while rapidly developing nations - such as China in recent decades - are necessarily blinkered in the pursuit of growth at the expense of shareholder profit and returns.

This week's bulletin also includes:

  • Ultra-loose monetary policy is not a panacea for the global economy and financial markets, but has helped encourage favourable conditions for a sustained recovery.
  • The World Bank believes high-income countries are "finally turning a corner" and wants emerging markets to pursue the virtuous cycle of investment and output.
  • The big challenge for emerging markets remains the effect on capital flows of the US Federal Reserve's reduction of its monthly bond-buying programme.
  • A slowdown of global productivity and inefficient use of capital could frustrate hopes to improve living standards and to close the wealth gap between nations.

View this week's Market Bulletin, which contains thoughts and opinions of St. James's Place and our range of investment managers on the key issues affecting investors.

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