Gregor Logan: Tumbling share prices will not hurt people on the street

On balance, the US economy continues to look reasonably sound, albeit with the exception of the lower end of the housing market. Despite a significant slowdown in new home purchases there has been very little impact on consumer spending.

It is possible that a greater impact may still occur but the importance of the US consumer has declined, influenced to a significant degree by the growth of India and China.

The credit problems in the sub-prime area have spread elsewhere, but so far are only a financial market problem, not a real economy problem. Unless that happens, the outlook for corporate profits in general will not alter, and the cheapness of equities relative to other asset classes will eventually come through.

The lending in the US has been primarily in the financial sector, not to consumer or corporate sectors. If you look at consumer and corporate balance sheets overall, they remain in rude health. The jury remains out on whether the credit market difficulties will impact upon expectations about general earnings. Global growth is much more balanced today than it has been for several years. The world economy is in pretty good shape, partly because we are no longer entirely dependent on the American consumer. And consumers of developing nations have significant spending power today. That too should be relatively unaffected by recent events.

As for Britain, the upward pressure on interest rates has definitely abated but until interest rates actually come down, or the central bankers' rhetoric changes, we are unlikely to see a significant low in the equity market.

Gregor Logan is joint chief investment officer, New Star Asset Management

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