GLOBAL - Political dithering and poorer than expected economic figures in the US may have spooked investors and sent equity markets into a spiral, but fund managers say now is the time to keep a cool head.

Since yesterday, the MSCI Europe has fallen by almost 4.5%, the MSCI USA All Cap by more than 5% and the MSCI World by 4.3%.

One source of investor concern has been the faltering US economy.

Keith Wade, chief economist at Schroders, said the world had dodged a bullet with the recent resolution of the US debt ceiling impasse, but he said it was clear the country's economy was not performing as well as expected.

"In the light of the disappointing second-quarter GDP and ISM reports, we are cutting our growth forecast," he said. "Our baseline forecast of 2.6% now becomes 1.8% for 2011."

Mark Burgess, CIO at Threadneedle, said investors worldwide had become "very concerned" about weak developed world growth in general and the consequent debt overhang.

"There is no doubt the concerns are real and rising," he said. "US growth is materially below even our pessimistic expectations, while moves in European bond markets are increasingly likely to precipitate recession."

But he said the latest crisis might be just the thing to spur politicians into action.

"At some stage, the authorities are going to have to get ahead of the curve, most likely through a globally co-ordinated bout of quantitative easing," he said. "Getting to this decision, however, is going to be complicated, and we may well need a catalyst in the form of a significant market crisis to make this happen. Indeed, we may be seeing the beginnings of this crisis now."

ING Investment Management said recent changes made by EU leaders to deal with the crisis had been a "positive surprise". But it said they still fell short of the long-term solution needed, adding that any future action would need to be "sufficiently divorced from the political process".

Valentijn van Nieuwenhuijzen, head of strategy and tactical asset allocation, said he was very disappointed not see a further increase in the size of the European Financial Stability Facility (EFSF).

"If things really become bad, and countries like Italy and Spain - as well as their banking systems - come under attack, there will simply be not enough funds in the kitty," he said. "It would have been much more preferable to give the EFSF so much fire power that it would convince markets the EMU could withstand any speculative attack."

Fidelity International was particularly damning of lawmakers, saying the panic had clearly shown that markets felt the US and euro-zone's politicians had been found "woefully lacking".

It added that each of Europe's two failed attempts to address the debt problem had been "flawed compromises" based on the "lowest common denominator of country self-interest".

While many fund managers have pointed to the obvious problems of weak economic data and political impotence, many others see little cause for alarm.

David Miller, partner at Cheviot Asset Management, said the current crisis was not a "re-run of the 2008 crisis", but rather the "next stage of the resolution of the same credit bubble".

He added: "While the headline market numbers are alarming, we should all take a deep breath and remember the fundamentals are much better than 2008. Banks are stronger, companies are generally in good shape, and traders are less heavily leveraged. This is the time for cool heads."

While John Ventre, portfolio manager at Skandia Investment Group, said: "Ultimately, European equity markets are very oversold, as are equity markets generally. I've been keeping plenty of powder dry waiting for an opportunity like this, so for me its time to put money to work."

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