Investment clock - Jan 2011

The 'Investment Clock' is generated by Trevor Greetham (Asset Allocation Fidelity Asset
Management). We found ourselves in the stagflation quadrant in December.

The investment clock approach generates growth and inflation readings based on past trends and
current momentum of lead indicators, to help forecast how the global economy may perform in the
coming three to six months. The growth reading sets the relative weighting of cyclical and defensive
assets (north-south on the clock diagram). The inflation reading sets the weighting of financial assets
versus real assets (east-west).

Quick summary: weak developed economies suppressed global growth readings while booming
emerging economies stoked commodity-driven inflation. Evidence is mounting that the world
economy has passed the trough of a new mini-cycle and global growth will strengthen over 2011
given the recent strength in US retail sales and improvements in CEO optimism.

What does this mean for investing? The most likely scenario is a strong, synchronised global
recovery. This could spell trouble for China and India as authorities would need to tighten fiscal and
monetary policies aggressively.