Global economic recovery on track

Global economic recovery on track

The global economic recovery remains on track. This is despite rising concern over sovereign debt levels, particularly in Europe. Equities, particularly in emerging markets, remain the favoured asset classes according to AXA Global Investors’ latest Quarterly Strategic Outlook.

“Deleveraging by households and governments was always going to be a feature of the recovery that would keep economic growth relatively subdued in developed markets” said Chief Economist Bevan Graham

“A front-loading of fiscal austerity measures is expected to further constrain near-term growth in some countries. But, as a result, medium-term growth prospects look brighter. While fiscal austerity will have its greatest impact in Europe, the weakness in the Euro will help export growth in the medium-term.

“In the meantime, the recovery in the United States is looking increasingly entrenched and the new challenge for emerging markets is to contain economic imbalances in the face of strong economic growth and strong capital inflows.

“It is this strong growth in emerging markets that is the key contributor to our expectation of global growth of over 4% per annum between 2010 and 2015” Bevan Graham said.

“Robust growth and better-than-expected earnings count for nothing when fear is in the ascendancy. We know that fear can be self-fulfilling, if everyone starts thinking a slowdown is around the corner and act accordingly, the slowdown will surely arrive. But an investment strategy based on guessing the expected level of fear (or greed) is a road to ruin” said Head of Investment Strategy Keith Poore.

“In times like this it is important to take a dispassionate assessment of the risks and not get lost in the moment. We trust politicians are doing the same, and don’t repeat the fiscal mistakes made during the Great Depression and turn a promising recovery into a double-dip recession. Our assessment of the situation is that European peripheral risk is manageable and markets will eventually move higher on the back of above-trend global growth and a margin-led sustained recovery in profits.

“Consequently, we remain overweight growth assets with emerging markets still our preferred asset class” Keith Poore said.

ENDS

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