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  • Economic growth in the crisis-hit economies still sub-par
  • Many European banks still not earning their cost of capital
  • New growth businesses emerging across a range of sectors which can use capital-lite strategies to grow

“We’re now 10 years on from the opening rounds of the great financial crisis – what has the ensuing decade taught us? Certainly, that banks need to be brought under control and that high debt is unsustainable. But also that it was right to stay in stockmarkets after policy eased in 2009.

“Today, economic growth in the crisis-hit economies is still sub-par, and the ratio of global debt to GDP is now at a record high. Many major economies have higher debt levels today than they had at the start of the crisis. The US Federal Reserve has a $4.5 trillion balance sheet. In the Eurozone, an equivalent of the US Troubled Assets Relief Program (TARP) is still needed to address non-performing loans.

“Despite the enthusiasm with which many investors jumped into last year’s “inflation trade”, long bond yields point to subdued inflation expectations. The disinflationary forces of technology and low productivity of capital investment are not easily shifted by monetary policy or tax cuts.

“The lesson may be to avoid leveraged low-growth businesses, with better prospects in companies that have core strengths to protect margins. Many European banks are still not earning their cost of capital. It may take another decade or two before the banking sector resolves its fundamental problems. Meanwhile, new growth businesses are emerging across a range of sectors which can use capital-lite strategies to grow. This makes a strong case for active management to focus on sound business structures.”