Lazard: Outlook For Global Equity Markets

The outlook for the 1st quarter of 2009 is out, prepared by the portfolio managers at Lazard. The key message, in my view:

Investors have come to a reluctant realization of the severity of the economic crisis, and we believe the impact of deleveraging after years of financial excess will continue to be felt in many parts of the economy. As government intervention attempts to stabilize the financials sector and facilitate economic recovery through eliminating toxic assets, deleveraging banks, and injecting capital into the system, the result may be a more prolonged, but less severe, economic downturn. Either way, the system must deleverage to a new equilibrium. However, the recent volatility in the markets has created significant opportunities to purchase leading companies at historically low valuations. A deeper analysis of the main developed and developing regions of the world shows where these opportunities may exist.

...the system must deleverage to new equilibrium ...