Markets started 2010 with a fear of a "double dip" recession. Investors feared a repeat of the Great Depression of the 1930s. Even in faster growing regions like Asia there was pessimism. Economists' predictions of positive growth were dismissed as fantasy.
Of course, economists were right (economists normally are). Growth came back. The world economy grew around 4% in 2010, just above its trend growth rate of 3.5%. The world economy should grow around trend in 2011, with a 3.7% rate of growth.
Growth in 2010 was led by policy stimulus. Fiscal policy helped growth in the OECD in the early part of the year. A limited inventory restocking led to stronger growth in global trade (most economies export to inventory demand, not to consumer demand).
Neither of these trends is likely to continue in 2011. Fiscal policy is tightening in many OECD economies. Inventory restocking is largely completed. The decline in inventory to sales ratios is already generating disappointing export numbers from countries like Korea, Taiwan and (recently) Germany.
So what issues are likely to matter in 2011? From the maelstrom of events, six potential trends for investors suggest themselves.
Text: Paul Donovan, Reuters
Images: AP/Reuters
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