Opinion: Personal View - Economy slowdown benefits markets as inflation fears retreat.

Pensions Week, July, 2006

Byline: Kevin Rendino

Recent weeks have been a difficult time for equity markets. The sharp correction reflected the emergence of inflation concerns, which raised the possibility of more aggressive monetary tightening with adverse implications for economic and profits growth. Markets become vulnerable to such a move, given the run up in some of the more cyclical plays in equities, and the correction became more violent once these positions began to unwind.

In the US, a weaker than expected employment report and continued worries about inflation has dominated the economic newsflow. The acceleration in ex- oil inflation has been the main source of concern over a deteriorating inflation background.

While a gradual rise in the ex-oil rate is...

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