Consensus forecasts for the remainder of this year have been moving up as well, although expectations for next year have fallen slightly.

On the economic front, the most important data recently was the July employment report. The numbers were disappointing, as the United States shed jobs, largely as a result of the loss of temporary census jobs. Additionally, private sector payrolls advanced by a less-than-expected 71,000 jobs. The unemployment rate remained steady at 9.5 per cent. There were, however, some bright spots. Hours worked and average hourly earnings both advanced, which augers well for the future. On balance, the report had something for both the bears and the bulls.

Inflation dropped back to 1.1 per cent in June from 2 per cent in May and 2.6 per cent at the start of the year. Underlying inflationary pressures should continue to diminish making a reversion of interest rates back to a more normal level some way off.

Overall, US and global economic statistics continue to show that the pace of growth has trailed off in recent months.

Both the US and Chinese purchasing managers’ indexes for July indicated a loss of economic momentum. Nevertheless, recent market reactions have shown that many investors have shrugged off the weak data, suggesting that most are coming to believe the recovery will continue.

In addition to improving equity markets, industrial commodity prices have advanced by almost 15 per cent since early June. It is difficult for us to reconcile rising commodity prices with a view that the Chinese economy is collapsing or that the US and other developed markets are heading for a double-dip recession. From our perspective, the recent soft patch of economic data is just that — a slowdown in the pace of recovery and not an indication that the economy is sliding back into recession.

Many risks remain to our cautiously optimistic outlook, including the failure of the US housing market to stage a meaningful recovery, the need for ongoing consumer deleveraging and the move towards fiscal austerity in many markets. Any of these factors plus the ever-present risk of additional external shocks could potentially conspire to derail the US recovery. Notably, however, BlackRock believes such a scenario is unlikely. We would be more concerned about the possibility of a double-dip recession if the corporate sector were showing signs of profit difficulties but that clearly is not the case.