Global equity markets can be expected to settle down next year, Leckie says.

Her view is that the concerns about inflation which have caused caution in the world economy – and central banks to hit the interest rate button – are probably receding.

There are still clear inflationary pressures, she says, but it looks as though the interest rate rises by a number of central banks around the world have had the desired effect.

“The oil price rises have acted like a tax,” she says. “Instead of passing the costs on, people have absorbed them and cut spending elsewhere.”

The worst-case scenario is that prices will continue to rise, central banks will lift interest rates, “we get recession and the equity market is cactus. We get a re-run of the 1970s.”

However Leckie doesn’t think that will happen. “I think the reality is we’ll see a return to a normal trend, albeit with some volatility.”

US equities have been languishing in recent times. The reasons are the booming China growth, various market scandals hurting investor confidence; concerns about US government fiscal policy high oil prices, and the emerging “lame duck” era of George Bush’s presidency.

Bush is constitutionally barred from running for re-election in 2008 and, even without his recent dip in popularity, will have diminishing clout over the rest of his term.

Leckie also points to a frequent “mid-term blues” effect which hits regardless of the president and which often causes a dip in equity markets.

“However, US firms remain on the whole robust. Earnings are strong and they have strong balance sheets.”