Upon reflection of many meetings and conversations with economists, investment managers, and officials in Asia, three broad investment themes came out loud and clear: global growth is likely to continue to be muted; this will create some challenges for emerging countries; and Asia will therefore have to consider trade-offs with respect to their economies and politics.
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If the current growth trend in bank credit continues, a failure on the part of the FOMC to raise its federal funds rate target and shrink its balance sheet will sow the seeds of a rate of consumer inflation above the FOMC’s 2% annualized target in 2014 and 2015.
Fiscal imbalances, monetary imbalances, and trade imbalances are serious issues that will continue to impact the relative value of the U.S. dollar, and none of these situations is easily solved. The concerns they raise should be given deep consideration by dollar-based investors moving forward.
hat a difference a new year makes. Fueled by massive liquidity injection from the European Central Bank (ECB) and expectations of additional easing from central banks around the globe, stocks raced out of the starting gate and left bearish sentiment in the dust.
Although a multitude of risks remain, including the unresolved situation in Europe, geopolitical risks from Iran, and fiscal austerity in developed nations around the globe, markets are enjoying the moment, allowing risk assets to flourish and volatility, at least as measured by the VIX index, to retrench to a seven-month low.
The world continues to ride the same train of global imbalances. While short-term solutions have allowed us to arrive at the next station, few are attempting to address the long-term issues. We believe that capital markets will continue to assail the weakest links in the financial system, which, hopefully, instills the required discipline for policymakers to make needed, but difficult, decisions. Unfortunately for long-term investors, this suggests that we will continue to encounter a series of market crises, leading to continued market volatility that can test investor resolve.
As we briefly review 2011, one thing is apparent: corporations generally had a better year than politicians, job seekers or investors. Despite 2011’s economic volatility, companies delivered better earnings than the consensus had forecast last January. Yet despite solid corporate profitability, macro uncertainties kept stocks under pressure for most of the year and ignited a simultaneous flight to the safety of U.S. Treasuries. With 2012 being an election year, we can expect to see even more sparring in Washington, D.C.
This latest quarterly issue of “ViewPoint” features an interview in which the bank’s chief investment officer discusses his outlook for the global economy and capital markets for 2012. He notes that the U.S. should exhibit positive growth, boosted by capital spending, and that a growing U.S. economy should keep the global economy in positive territory despite the situation in Europe.
The financial crisis that began almost five years ago is still with us, and we are still dominated by the events unfolding in Europe. What are some of the root causes of the crisis, and what is the future likely to hold? This white paper examines the evolution of the financial crisis and offers advice on how investors might best navigate the complex future we face.
Against the backdrop of a double decoupling in growth and inflation between economies in the developed and emerging worlds, investment experts gathered to reappraise and analyze the global economic and financial situation and outlook. The key points and conclusions from their discussions are presented in this new, annual publication.