Barclays Capital Recommends More Cautious Stance on Risk

The global expansion continues, but policy normalization will be a constraint on market performance, Barclays Capital today said in its latest flagship quarterly research publication, Global Outlook: Winding Down the Recovery Trade.

“We are recommending that investors shift to a more cautious approach to markets than the risk-embracing positions we have recommended since the recovery got underway two years ago,” said Larry Kantor, Head of Research at Barclays Capital. “We generally favor developed country over emerging equity markets, particularly the US, where policy is still easing, immediate growth prospects are best and risks are relatively low.”

Additional themes of Barclays Capital’s Global Outlook include:

• The events of recent weeks, in Japan as well as the Middle East and North Africa, should not derail the expansionary trend
• Monetary authorities around the world are shifting their focus from growth to inflation
• Emerging markets exposure should be focused on currencies and local markets that have not appreciated dramatically, such as Korea
• Avoid government bonds; credit is now basically a range trade
• Inflation breakevens have risen, but remain an effective way to hedge inflation risk

Underscoring the forecast in the latest Global Outlook are the findings of Barclays Capital’s Global Macro Survey, conducted in March and capturing the views of more than 1,000 institutional investors. In the survey, only 7% of investors saw the “Goldilocks” scenario of growth recovery and easy monetary and fiscal policies continuing. Investors in the survey also indicated a growing concern over inflation, though in the case of the US, the majority did not expect inflation to impact Fed policy this year.

About Barclays Capital’s Global Outlook

The Global Outlook research report, published quarterly, provides an assessment of all major economies and outlines the likely implications for global financial markets, including commodities, credit, economics, emerging markets, equities, fixed income and foreign exchange.

About Barclays Capital Research

Barclays Capital is committed to bringing our clients a best-in-class, global research franchise. The firm has a team of approximately 800 professionals covering every major Research discipline, asset class and region. In 2010 Barclays Capital was named Best Bank for Credit Research and Best Index Provider in the Credit Magazine Americas Awards, was named Commodities Research House of the Year in the EnergyRisk Asia Awards, ranked #1 for Fixed Income Research by FinanceAsia, ranked #1 for Overall Trade Ideas, #1 for Sovereigns Research, and #1 for Supranational and Agencies Research in the Euromoney Fixed Income Research Poll, and ranked #1 for Bond Market Indexes and # 1 for web-based tools in the Institutional Investor All-America Fixed Income Research Poll.

About Barclays Capital

Barclays Capital is the investment banking division of Barclays Bank PLC. With a distinctive business model, Barclays Capital provides large corporate, government and institutional clients with a full spectrum of solutions to their strategic advisory, financing and risk management needs. Barclays Capital has offices around the world, employs 25,000 people and has the global reach, advisory services and distribution power to meet the needs of issuers and investors worldwide. For further information about Barclays Capital, please visit our website www.barclayscapital.com.

For further information about Barclays Capital, please visit our website www.barclayscapital.com.