Han de Jong, chief economist at ABN Amro

NOW is the time to increase investments in the stock market, says the chief economist at ABN Amro Bank.

Han de Jong, who this week met intermediaries and clients in the Island, said that despite the turmoil of recent years he was now ‘relatively optimistic’ about the future.

‘People have been burned badly and many think they cannot cope and how can they ever recover. But there is potential in this market,’ he said.

In part his optimism is based on the ‘unprecedented’ policy response coming from governments.

For example the Dutch government has committed an initial 16.8 billion euros to supporting ABN Amro, plus a further 2.5 billion euros. This mirrors the ‘enormous’ fiscal and monetary policy commitments made by the UK, US and other governments in the light of the crisis in the financial sector.

‘Economists take strong views, but in reality no one really knows how this will pan out,’ said Mr de Jong. ‘You develop a story line, based on logic and economic theory, and then see if there is evidence to support it.

Our storyline is that the business sector has gone through a savage inventory cycle. But we think this is now abating and there is some stabilisation and rebuilding going on. For example in the last couple of days there has been positive news from Intel and similar cyclical companies.’

‘That is not to say that all the problems will be solved – do not get overexcited. It will take a while yet,’ said the economist.