Consideration is needed of appropriate levels of risk premiums after markets that since March 2009 had basked in eighteen months of acquiescence to government largesse as source of succor. Such considerations apply to advanced country markets weighed down currently by slow economic growth and to emerging country markets hitherto buoyant on hot money flows alongside strong economic growth. They are also likely to apply more broadly than being recognized, to sectors and for individual companies. We believe quality of management of operations and of financial structure are likely to be of the essence, heightening the importance of revenue growth. We believe to be rising in importance the consideration of appropriate risk premiums for the long term, based not on present long government bond yields but instead on free market levels on an inflation base of 2%.
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