An update on our investment strategy in light of the recent events.

As was widely anticipated, the Federal Reserve has decided to resort to a new round of quantitative easing. “QE2”, announced on Monday, will take the form of buying around 75 billion dollars of government bonds per month from now to the end of June 2011.

Since August of last year, the oil price has nearly doubled. Whereas the first part of the rise in energy prices (2002-2006) occurred during a period of - and was partly a symptom of - strength in the world economy, the recent increase comes at a time of slowing growth in many countries. It could lead to an environment of global stagflation and therefore poses a serious risk for equity markets.