How will investors regain confidence?

We all know the world economy is in the midst of a slowdown since the recovery from the 2008/09 Global Financial Crisis. Up to now, all eyes have been on the economic and financial capacity to strengthen growth, but we wonder whether the real question is whether the world has the political ability to do the right thing.

With interest rates so low in most major economies, enormous budget deficits and extensive financial imbalance, there is only so much that policies can do to help these deficiencies.

We believe the missing piece is not the economic realities that we have all adapted to, but more the political paralysis that we have experienced over the past few months.

While the actions to regain momentum on world economic growth will be no easy feat, we feel that the three primary events that need to happen for this occur include:

1.	The US needs to pass the substantial fiscal package announced by President Obama in order to boost growth and lower unemployment. The package targets public investments, tax incentives and jobs together with careful reforms to restore fiscal sustainability.
2.	European governments need to take more forceful action by working together and alongside the European Central Bank in supporting Europe’s financial system and ensure governments can borrow at sustainable interest rates as they reform.
3.	Growth economies, such as China, will need to keep pushing for greater domestic demand and allow their exchange rates to adjust to market forces, although the latter may take time to evolve.