Booming fuel prices, the long-term impact of the sub-prime mortgage collapse and a slow but steady rise in inflation have some financial analysts suggesting that the worst is not necessarily over.

In a recent white paper, London-based Schroder Investment Management Ltd. says that it continues to take a cautious approach to equities, as it has for some time.

The organization says it would need to see some signs of macro stability before increasing its exposure to the asset class. On the other hand, it says, the company has become more positive on corporate bonds – via an overweight in high yield – and reduced cash to neutral.

The “r” word has also reared its ugly head: the company says that its models suggest the end of a slowdown phase in the economy and a switch to a straightforward recession stage, which has brought a movement towards greater risk in the past.

Schroder says that economic growth in the United States is only expected to reach 1.5 percent this year, with tax cuts only likely to provide temporary respite from the effects of the credit crunch and overly strong commodities – with a moderate recovery seen as we move into 2009.