By Daniel Hunter

Eurozone growth remains the main concern amongst intermediaries, with 71% seeing it as one of the biggest macro-economic challenges to investment growth over the next six months, according to the latest Baring Asset Management Investment Barometer.

Given the recent turmoil within Europe, advisers also remain concerned about the ability of over-leveraged economies, such as Cyprus, to reduce their debt, with this a concern amongst three-fifths (60%) of intermediaries, up from 55% when the barometer was last conducted back in December.

Furthermore, unresolved US "fiscal cliff" issues are another economic challenge foreseen by 62% of intermediaries, representing an increase of five percentage points on December 2012.

Looking at the UK economy, nearly three in five (58%) are predicting that the UK economy will experience higher inflation, up from 55% in December. A further 37% believe that we are set for a period of stagflation - where high inflation is accompanied by weak GDP growth.

Nearly nine out of ten intermediaries (87%) reported that their clients are still concerned about the effect that inflation is having on their cash investments - up from 78% this time last year and the highest since Barings conducted its first barometer back in 2010.

"Considering the recent turmoil in the Eurozone, it is unsurprising that intermediaries are concerned about overall global economic health. Leaving aside Cyprus, the macroeconomic picture does remain tough, albeit marginally less tough than it was in the Autumn," Rod Aldridge, Head of UK Retail Distribution at Barings, commented.

"Cyprus threatens this period of relative calm, but we take some comfort that ECB policy settings appear to be pro-growth with the banking sectors and bond markets in the South remaining incredibly resilient in the face of this tough test."

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