Inflation the dark cloud on the horizon

2011-02-05 00:00

THE growing threat of inflation, coupled with a further weakening of the rand, emerged as key themes in an Alpha Asset Management presentation that was made to investors in Pietermaritzburg this week.

Group CEO Kerry West Fynn told Weekend Witness that another notable theme set to dominate the economic landscape is the recovery of the United States consumers. He said that this recovery is likely to emerge on the back of better employment prospects in the U.S. economy.

Alpha Asset Management — established 13 years ago — is a wealth-management company catering for families.

The company has about R5,5 billion in assets under management.

“This is in a sense the ‘calm before the storm’. There is a lot of liquidity pumped into the financial system and inflation is bound to come back.”

He also believes that American consumers will eventually revert to their old spending habits.

“U.S. unemployment is high. But corporate profits have increased and productivity per worker has risen dramatically. The hiring process will be on the up as we may have seen the worst of unemployment in the U.S.”

Kerry added that the rand’s strength in recent months is likely to come to an end in 2011. “There is a lot of hot money chasing the rand. But we have seen, for the first time in a while, net outflows in the bond market, which is very negative for the rand.”

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