EQUITY instability around the world is likely to have an impact on Guernsey’s investment industry – however investors should not expect a market crash. ‘Volatility is bad news for the investment industry. In times of uncertainty it is harder to get investors to part with their cash,’ said Ashburton global investment strategist Peter Lucas.

‘Overall I think we are only part way through a bigger corrective phase. There is scope for a recovery in the short term, but I think we will see a general slow down in economic growth,’ he said.

Mr Lucas said if the market were to crash, it would have already happened.

Events taking place in the US appear to be the driving force behind the current market instability.

‘America is at the heart of it all,’ he said.

‘The US government currently has its biggest account deficit ever, which is unsustainable. The way around it is to slow the growth of the US economy.’

Mr Lucas said the introduction of higher interest rates would encourage saving, discourage borrowing and lead to a reduction in trade and imports.

Europe would also be affected, he said.

‘The UK market is being impacted as three negative factors come together at the same time – oil prices, interest rates and concerns over higher mortgage rates.

‘There are also genuine concerns that property prices might fall. I believe this combination will all lead to a slowdown in growth.’

Once this began to take effect, Mr Lucas said he anticipated a cut in rates and a reduction in oil prices.

He expected investments in bonds to increase but thought equities were still a fair value as companies were enjoying healthy profits.