|L&G Investment view: battling headwinds|
|News - Alternative Investments|
|Tuesday, 20 November 2012 15:41|
Legal & General Investment Management believes the global economy has troughed but it’s not expecting a bounce in growth by the end of this year.
This is LGIM’s macroeconomic snapshot.
“October was a month in which markets were generally stuck in their ranges as the buoyancy provided by central bank action deflated.
“Upcoming political changes in both the US and China were considered potential catalysts for market movements, but Hurricane Sandy struck in October which added to the significant headwinds currently facing the US.
The LGIM view
“Global overview: whilst we continue to believe that the third quarter will mark the trough for global growth, we do not foresee a significant bounce in growth data for the fourth quarter, owing to both storm Sandy and quarterly euro zone fluctuations.
“Global capital expenditure continues to slow, and when combined with a modest inventory cycle, this has driven an overall trade slowdown.
“Although global consumption and services have held up better, our central case expectation remains ‘muddle through’ (i.e. sub-trend growth rather than recession).
“Looking at 2013, we continue to think that the consensus is materially underestimating the effect of the fiscal cliff on US growth, while for emerging markets we are above consensus views on growth.
“US: US data surprised significantly to the upside during October, but we expect Hurricane Sandy to take around 0.5% off US GDP in the fourth quarter of 2012.
“Despite the widespread devastation, a positive impact on GDP growth due to reconstruction effects may be witnessed in the upcoming quarters.
“The underlying trends heading into the fiscal cliff may be difficult to assess because of the data impact of Hurricane Sandy, but even with a full extension of the Bush tax cuts, US growth faces headwinds into 2013.
“Euro zone: Despite European Central Bank measures, the euro zone remains a key potential risk to our ‘muddle through’ outlook. Spain appears reluctant to request a bailout, although we still believe the request will be made in the next few weeks.
“This will allow the ECB to activate Outright Monetary Transactions and markets will have greater clarity as to how the conditionality arrangements will pan out.
“UK: We expect the UK economy to contract by 0.3% in the fourth quarter of 2012 followed by modest gains in 2013.
“Encouragingly, labour market data has been surprisingly strong in the UK. This is attributed to the flexibility of workers filling the vacancies, in terms of both geographical movements required and accepting flexible employee/employer contracts.
“Emerging markets: Growth appears to have bottomed out and we expect markets to recover further as earlier policy easing measures feed through. Indeed, we have increased our China growth forecast ahead of consensus and expect emerging markets growth overall to decouple from developed markets. This is due to both stronger domestic demand and stronger intra emerging market trade links.”
UK Airport Car Park Investment
Holiday Home Rental Guide
Investing in Buy-to-let
Investing in buy-to-let
Self Invested Personal Pension Guide for UK Expatriates