The global economy is merely undergoing a "slowdown" and is not in recession.

That is the view of investment strategist and founder of Trilogy Global Advisors, William Sterling, who addressed delegates about the world investment outlook for 2008 at Capital G Investments' presentation held at the Elbow Beach Hotel on Thursday evening.

And he recommended investors to put their money into a four-way split between high quality government bonds (25 percent), real estate (25 percent), the US markets (25 percent) and the non-US markets (25 percent, five to 10 percent of which is in emerging markets).

The session kicked-off with Joel Schaefer, president and CEO of Capital G Investments, giving a talk on what had happened over the last year, with a strong first half to 2007 followed by a poor second half performance.

His findings were borne out in the growth activity of the world stock indices, as the S&P 500, Russell 2000, FTSE 100 and Nikkei Index all recorded positive movement between January and July and then going into decline from the halfway stage until the end of the year, mirrored by the figures for the treasury yield and deal activity.

But, there were some expectations, he added, with emerging markets such as India and China, as well as Brazil and Russia, doing well in the opening six months of 2007. On the downside, however, inflationary pressures on wheat (at record highs), oil (nearing $100 per barrel) and gold (trading above $840 an ounce) all increased.

"Earnings in the US markets had continued to grow at a double digit rate for five years, but it looks like earnings didn't grow in 2007, in fact, they shrunk a bit," said Mr. Schaefer.

"Overall, the markets had a very positive first half of the year, followed by a poor second half of the year.

"We saw very high levels of volatility and all through 2007 we started to see volatility increasing and it seems like levels of volatility are quite high, but, in reality, we moved to normal levels of volatility because they were previously quite high to start with."

There was certainly a significant rise in volatility during the second part of last year, said Mr. Schaefer, with all asset-backed securities being repriced, a downturn in the US housing market and Government intervention in the sub-prime mortgage crisis, and liquidity drying up globally as banks lost trust in each other, contributing to the turmoil of the latter part of 2007.

Allied to this, Mr. Schaefer said, were financials announcing record write-downs totalling $53 billion, global mergers and acquisitions volume falling by 25 percent, talk of recession, Middle Eastern and Asian state investments funds injecting liquidity to shore up their Western counterparts' financial institutions and the value of the US dollar weakening considerably.

Meanwhile, Citigroup wrote down $18 billion, closely followed by Merrill Lynch at $13.5 billion, with Morgan Stanley the next at $7.9 billion, which, when added to the totals of HSBC, Bear Stearns and the Bank of America, amassed to $52.7 billion, equating to almost a fifth of Bermuda's Gross Domestic Product, he added.

The second half of the presentation saw Mr. Sterling give his thoughts on the future for the world economy this year, claiming that, despite recent market volatility, it seems poised for continued expansion in 2008 and beyond, although the advanced industrial countries, particularly the US, are generally expected to post slower growth.

On the flipside, though, he reckons emerging economies remain robust and are becoming increasingly important to global

growth, with equities staying attractive propositions to investors relative to fixed income funds.

According to the IMF's latest statistics, the forecast for world growth is down from a rate of 5.2 percent in 2007 to 4.8 percent for this year, while the rest of the markets follow suit, with Canada dropping from 2.5 percent to 2.3 percent over the same time period and the UK declining from 3.1 percent to 2.3 percent, but the US should remain up at 1.9 percent.

"Despite the market volatility, I think we are still in a growth economy," said Mr. Sterling.

"It is a slowdown for sure, but you could not think of a better time for the US to have a slowdown while all of this dynamism in the rest of the world, particularly the emerging markets, acts as a cushion."

Mr. Sterling believes the global economy is in the midst of a "mid-cycle pause", which should help reduce inflation pressures and set the stage for continued growth over the course of the decade.

He also thinks central banks have the necessary ammunition and motive to prevent the slowdown from turning into a co-ordinated recession and favourable valuations and prospects for continued global growth should favour equities over fixed income investments, with investors holding well-diversified portfolios best positioned to cope with volatile market conditions.