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Opinion

Against the tide: Moving into the end game

by David Roche

It's an irony that better economic performance heralds thinner pickings in the financial markets. And faster global growth lies ahead. That's why it's time investors reduced their equity holdings, got out of most bonds and built up cash.

There is a growth shock out there for all the OECD economies. I expect real GDP to grow at 3.4% next year. What's more, inflation will be over 3% in the OECD by mid-1997, compared with just over 2% this year.

This growth shock is the result of extraordinary monetary easing and the amazing purchasing power created not only for corporations through their increasing profit share but also for households. Money supply is growing much faster than GDP in the OECD and it also costs less than the average of the last 10 years in both nominal and real terms. And international liquidity is booming, too.

Labour income has soared in most places, despite rising unemployment in Europe and Japan. Most people have kept their jobs and got paid more in real terms, while in the US
8 million new jobs have been created in the last three years. Households have also got richer through their investments.

So








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