LEADING EXPERTS PREDICT 2011 TO BE MARKED BY A CONTINUED SLOW AND STEADY GLOBAL RECOVERY
2011 Global Equity Strategy Outlook – Grinding On
“Having ground out a double-digit return in 2010, we expect global equities to do the same in 2011,” said Robert Buckland, chief global equity strategist, Citi Investment Research & Analysis. “We remain constructive on equity markets and see prospects for further gains from here. To the disappointment of policy makers, we don’t think companies in the developed world will use the cheap debt to spend on new investment. If Japan is our favored regional recovery story, Emerging Markets remain our preferred structural growth play. Talk of a deflating Emerging Market equity bubble is premature, in our view,” he added.
Trends in Foreign Exchange Markets
“The U.S. Dollar is expected to maintain current levels against the majors through mid-year, absent renewed crisis in Europe,“ said Michael Woolfolk, senior currency strategist, global markets division, Bank of New York, Mellon. “The U.S. Dollar will resume its structural decline in the second half as the European Central Bank and other central banks begin raising interest rates. The Japanese Yen is expected to weaken against the majors on weak growth and interest rate differentials, as well as
renewed Japanese Yen-funded carry trades. The Euro, British Pound and Swiss Franc will be resilient among the majors despite weak growth and exposure to the European sovereign debt crisis. Emerging Markets asset price bubbles will eventually burst, but not before they get much larger,” he added.
2011 Global Outlook – Reaching Limit of Washington’s Debt Expansion
“The global expansion is strengthening, but inflation and debt problems will keep growth limited outside of Asia,” said David Malpass, president, Encima Global LLC. “For 2011 we are expecting 3.5% growth in the U.S., less than 2% in Europe and Japan, and 10% growth in China. The Fed’s bond holdings risk inflation and will end up distorting markets and the Fed’s monetary policy decisions for a generation. We expect that the U.S. marketable debt to GDP ratio will rise from 60% to over 90%, a red flag for future U.S. growth. Overall, U.S. debt is stuck at 245% of GDP. Corporate earnings growth should remain strong, helped by non-U.S. profits, now nearly 25% of total U.S. corporate profits,” he added.