The turbulence in the credit market which began in the summer could trigger a recession in the US next year, warns Global Insight, the monthly investment overview published by Standard Life Investments. The investment house also forecasts a drastic slowdown in other economies; both trends seriously impacting public sector finances.

The turbulence in the credit market which began in the summer could trigger a recession in the US next year, warns Global Insight, the monthly investment overview published by Standard Life Investments. The investment house also forecasts a drastic slowdown in other economies; both trends seriously impacting public sector finances.

The research article examines implications for fiscal policy and investor choices as economists downgrade global growth forecasts for 2008. Andrew Milligan, head of global strategy for Standard Life, outlined the company's vision: 'Monetary policy has rather dominated the discussion amongst market participants over the summer months. Central banks have been forced to change tack, whether by cutting interest rates, injecting liquidity into money markets through various channels, or acting as overseer of the financial system, such as helping with bank restructuring. So far, fiscal policy has rather taken a back seat.'

However, he says, there are some key follow-up questions: Can public sector finances offset some of the economic headwinds, not only in the US but other major economies? As budget deficits expand for the first time in several years, what are the implications for bond markets and hence investor choices? To read the article in full on Standard Life's website, click on the link below.