how healthy are UK equities and the housing market?
MSW: How does this make you feel about the equity market, James? JF: I’ve been positive on stocks for a long time, but not anymore. I don’t think stocks are expensive, but I do think there is a sentiment hurdle that has to be dealt with. In the US, whenever GDP growth drops below 1.5%, profit growth goes negative – yet the consensus is still that America will keep seeing double-digit growth. There needs to be a style shift. The same was true in 1990. Then the S&P dropped 20% in six months, after which people started to think the bad news was in the price, and with rates falling they were happy to buy back in. I would be very happy in that same situation to do the same this time round – but buy now? No. Not until it’s clear everyone understands the situation. MSW: Is James a bit extreme, Jeremy? JT: Not if all the things James thinks will happen transpire. But there are many reasons why they might not. I’m not an economist, but is MEW going to fall as much as that? Might wages rise and
