nice to see this thread is being based on the rational. There are always two sides to a debate.
The sunday times has a two-sided perspective from a couple of experts. I've cut and pasted it below - I remain a cautious for the future as much as I'd like to be optimistic it's not clear to me that the 'R' word has gone away.
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Experts disagree about the state of the economy. Who is right and where should you invest? By Nick Gardner
Investment tips for bulls
and bears
Tips if the worst is over | If the worst is still to come
RECESSION or no recession? The question is still dividing the country's leading economists, leaving investors in a quandary.
If we are heading for a recession, or something close to it, then it will have a big impact on which investments to choose. But if we are likely to escape, then investors would be well advised to head out of cash and bonds - a traditional safe haven during troubled times - and back into equities.
The decision hinges on exactly where we are in the economic cycle. Novice investors often wonder how the economic and investment cycles work, because the professionals base most of their decisions on this remarkably consistent chain of events.
Many experts say the cycle has shifted away from the extreme boom-and-bust pattern, but it still operates in roughly the same way. Economies prosper, with strong growth that inevitably gets ahead of itself, so they have to slow before they pick up again.
This usually leads professional investors to rotate their investments into so called "cyclical" stocks when earnings begin to improve after a slowdown. Then they move into commodities as economic growth gathers pace, leading to more demand for raw materials, then into cash as the economy slows, before retreating into the safety of government bonds when experts fear a recession.
Bonds have performed well during the past year as investors have sought this safe haven, but many are now venturing out of bonds and tentatively back into equities, usually into defensive stocks such as utilities, pharmaceuticals and food retailers, which tend to do well whatever the market conditions.
But this cycle is not like previous ones. It has not followed normal patterns, thanks largely to the extraordinary bubble created by technology stocks.
Now, experts are divided on just how dramatically the economy is going to slow down - and whether it will be dramatic enough to plunge the world into recession.
So where are we in the investment cycle today? Opinions differ once again, with some saying the time is right to dive aggressively back into technology shares, which should rebound on any good earnings news, while others think it is safer to stay in cash or high yielding, defensive stocks until the outlook is clearer.
However, there are investment strategies that can benefit from either eventuality.
Which one you choose depends on how much risk you are prepared to take. Given that the finest economic and stock-picking minds in the country are so deeply divided, either route is a gamble.
Even staying in cash is effectively a risk, since investors could lose out on the bulk of a market rally. But here are the two main scenarios and investment options.
Prepare for worst
Some indicators suggest Britain's economy is in worse shape than previously thought.
The number of profit warnings issued in the first quarter of this year was 136 - 11 more than in the fourth quarter of 1998, when the world was also fearing global recession.
In addition, the recent market rally does not appear to have taken widely expected earnings downgrades into account. British exports to America, for example, have dropped by 20%, but the information has not affected share prices. Also, yields on corporate bonds have been rising to reflect the increased risk of companies defaulting on their debts.
In other words, much of today's evidence would suggest that we are approaching a recession in Britain, even if we are some months away from it.
As a result, many investors will want to adopt a safety-first attitude, especially those stung by the technology crash and those in need of a decent income stream. These people should either stay in cash to avoid another drop in share prices - something that many experts believe is on the cards - or move into defensive stocks. Many of these are paying high yields, and tend to outperform the market in times of trouble.
Richard Crehan of Morgan Stanley, suggests those who are already in cash should stay there. He says: "Economic growth is positive but slowing. There is a lot of bad news to come in terms of earnings growth and profit warnings, but the market, at nearly 6,000, has not priced this in yet."
Crehan thinks the market will fall back again before starting a full recovery, but that defensive shares will suffer less than most, and that their yields could make up for any drop in prices.
The problem for those wanting to stay in cash is that returns are falling, and even the best savings accounts typically pay only 2% or 3% once inflation and tax are taken into account.
Being bullish
Peter Oppenheimer, chief investment strategist at HSBC, disagrees with Crehan and says we are further into the cycle than he suggests - roughly at the cross-over point between bonds and equities - although most private investors are in cash rather than bonds.
He believes America will enter recession but that Britain will avoid it. As a result, he says British investors should return to the market. If they believe, as he does, that this will be a typically cyclical recovery, then stocks that are sensitive to changes in economic conditions are the ones to go for. He says: "We turned bullish on equities at the end of March. We think cyclical stocks - those most sensitive to an upturn in the economy - are a good bet, and tech shares have been the most cyclical of all."
This effectively means that the slowdown in business and consumer spending on technology, which was extremely marked in the first quarter of this year, and also on telecoms, will reverse, and earnings for these companies will begin to improve, prompting a surge in their share prices.
Autonomy, for example, had 15 contracts deferred earlier this year, but half have now been signed and the other half have made assurances that they will not cancel their orders.
Similarly, Marconi, Sage, Vodafone and Baltimore, which have all seen share prices decimated, are at the upper-end of their businesses and could be among the first to benefit from a change in sentiment.
Several other factors have affected HSBC's change of mood. One interesting indicator is that March saw the biggest net outflows of American mutual funds - the equivalent of unit trusts - since the crash of 1987, and traditionally the biggest outflows from retail funds occur about a month before an upturn in equity performance.
What happens in America has a big influence on Britain - it is virtually unheard of for the American market to rise and the British market to fall, as they usually work in tandem.
As a rule, equities on both sides of the Atlantic reach a trough approximately six months before the end of a recession.
While neither Britain nor America has technically entered recession, America has effectively been enduring a "profit recession", and Britain is perhaps a little behind America. The UK is suffering a marked slowdown in economic growth, with profit margins squeezed by increased competition. Investors should also bear in mind that leaving stock-market investment too late can be expensive. Oppenheimer says the rise in the first six months after a bear market accounts for about 50% of the total returns for the next three years.
A final word of warning: many technology shares enjoyed a good run in April and remain expensive on any conventional valuation. Venturing back into these stocks is not a move for the faint-hearted. But experts say that they will be the most sensitive to any positive news on economic growth and earnings.
Perhaps the most sensible advice for the time being, however, is to retain a defensive stance. If the finest minds in the country disagree, it probably makes sense to sit on the fence.
Defence or attack?
Traditional defensive shares like those in water or power companies are a good bet in uncertain times. But aggressive investors prepared to take a gamble on an economic upturn could make a killing in technology or telecom shares, which could be among the first to benefit if we avoid recession.
