The West Midlands should be one of the significant beneficiaries as Britain’s economy recovers, a financial expert has predicted.

Jim Wood-Smith, head of research at Williams de Broe, the private client division of quoted stockbroker Evolution, urged investors to take a lead from Mr Spock – the half-Vulcan, half-human, highly logical science officer aboard Star Trek’s USS
Enterprise would, he suggests, be questioning why people’s economic outlook remains so bleak.

We are trying to find problems which aren’t there.

Speaking ahead of a Williams de Broe Investment Breakfast at the Hotel du Vin in Birmingham on Tuesday (OCT 6) Mr Wood-Smith insisted: “2010 will be a lot better than 2009 and it is extremely unlikely that the recovery will pass the Midlands by.

“Indeed it is quite possible to point towards an upbeat picture. The majority of economic recoveries we have experienced in the past have been led by the consumer – this is not.

“It is a manufacturing recovery and so the Midlands should benefit given it is a part of the country where we still have a manufacturing business – and particularly if you look at the car industry.

“Over the last year nobody has been making cars, which is why no one now has any cars in stock. But the evidence from the showrooms is there is strong demand, be it cash for clunkers or whatever.

“That means auto manufacturers will have to start making cars again and that means orders for the supply chain.”

He went on: “The attention of most investors is still looking too far out – trying to find problems which are not necessarily there.

“Everyone knows that most of the issues which caused the recession have not been resolved yet – public sector spending will have to be cut back, there could be big inflation coming at some stage and bank balance sheets still aren’t strong enough.
But that does not preclude financial markets, and particularly equities, moving substantially higher in the meantime.

“There is likely to be a period of a year or two in investment terms before those issues we are all concerned about come back into play.

“In the last three months, the FTSE 100 has risen by roughly 1,000 points, or as close to 25 per cent as makes no difference, making this one of the most remarkable and profitable quarters ever for equity investors. But it is fascinating that still so few people are prepared to believe this can go on.

“The general reaction to our message at Williams de Broe that the odds are stacked in favour of equities moving quite significantly higher yet over the coming year, is that of disbelief and incredulity.

“Hands-on experience of the economic recovery, such as it is, is that it is still slow, erratic and fragile. And after the trauma of the past two years, it is only human nature to be deeply sceptical that markets can be roaring away when the world economy is still on its knees.

“When the economy is growing and markets are booming, we believe that this will last forever. And when the past two years have been so utterly horrendous, it is only human logic to think that this will be the way of the world for ever. But human logic, as Mr Spock was wont to point out, is illogical.

“The booming equity markets are not telling us that happy days are here again and that we should start ordering Ferraris, a butler and a month in the Maldives. They are telling us they were wrong in March when they thought the world may come to an end and that the medicine given by the combined Western governments and central banks has worked. And if the medicine has worked, then things are eventually going to get better again.”

However, there would be wobbles in the market as investors took profits. “At which point, the army of self-appointed Cassandras will blow their trumpets very loudly and tells us we are, once again, all doomed. The good news is that this will give another buying opportunity.”