SO what is happening? How did we end up here?

Acknowledging the exceptionally gloomy start to the year, it does need to be put into perspective; headlines versus the real economy, temporary correction versus global recession, writes Sam Dolby is an Investment Manager at Brewin Dolphin in Newcastle.

China’s currency rebalancing is simply the country moving away from an export driven economy and becoming more diverse, while the well-publicised oil collapse has resulted due to an oversupply rather than a lack of demand. Although markets are focussing on these issues – particularly the emerging markets - people are forgetting the economic improvement seen in the US and Europe last year. Employment data suggest these economies, including the UK, are still growing.

The lower oil price should be acting as a tail-wind but it is being overlooked; the savings should feed through to demand, eventually. The global economic growth debate has distorted stock markets and essentially, strong companies with sound balance sheets can be purchased on cheaper valuations. This should be attractive for long-term buy and hold investors.

The negative interest rate decision in Japan is an attempt to encourage lending and stimulate the economy. The path of interest rates in the US and the question of when rates will rise in the UK remain a little unclear and will have different implications for different people, hitting some pockets more than others. However, after recent market and commodity price turmoil, and persistently low inflation, there is probably even less chance of the Bank of England making changes to the UK Bank Rate anytime soon.

In the UK, there is talk of a shift toward more domestic earners driving the economic recovery. Mid-cap stocks are more exposed to this. Regardless, the fundamental message about earnings is that our companies have to grow them. Construction remains robust and coinciding with real wage rises and despite the tighter requirements to borrow, mortgage applications are still increasing. The help to buy ISA should also stimulate demand in this area and benefit housebuilders.

Every day we hear positive news stories of businesses thriving in the North-East and North Yorkshire, and by Heck! don’t we know it. The well-known Boston Sausage company in Lincolnshire has some healthy competition from sausage maker Heck! which plans to create a £3.5m Willy Wonka-style ‘Sausage World.’ Meanwhile R&R, the ice cream maker, is in advanced talks with European giant Nestlé to create a 50:50 joint venture. Friendly neighbours in Leeming Bar, R&R and Heck! are certainly creating footsteps for aspiring entrepreneurs to follow in.

More national brands are also creating a positive feel about doing business in the North-East. Hartlepool based brewer, Camerons, has announced it is to buy 40 pubs in a £30m expansion; one of Darlington’s largest employers recently completed a £12.5bn merger with mobile phone giant EE to create the UK’s largest telecoms company; and Nissan’s Qashqai and Juke models produced in Sunderland helped new car sales in January rise to an 11 year high.

Despite uncertainty in the global economy there is much to celebrate in the North-East and Camerons, for one, would certainly encourage raising a glass to the North-East’s prosperity.