Last updated: 11:47 / Thursday, 15 October 2015
Standard Life Q4 Outlook

The Implications of Financial Stress

Imagen
The Implications of Financial Stress

Jeremy Lawson, Chief Economist, Standard Life Investments said at the publication of the Global Outlook from Standard Life Investments: “We continue to see a moderate global expansion into 2016, supporting modest corporate earnings growth outside the energy and materials sectors. Our view remains that a widespread or systemic emerging market financial crisis is unlikely, but the pressure on a number of large developing economies will not disappear quickly. Global GDP growth is expected to improve marginally but remain below trend.

“The implications for investors are considerable, as they need to consider throughout their strategic asset allocation process what the repercussions are of low returns on bond, cash and equity prices over the remaining part of this business cycle. Listed equities in particular are sensitive to developments in global activity, as they tend to have larger external exposures than do economies as a whole. Moving up the capital structure towards selected credit may have advantages in this environment.

“At the epicenter of the crisis, in China, a hard landing is not our central scenario as we expect extra fiscal stimulus, but the transition to a new growth model will remain bumpy and unfriendly for commodity producers. More deceleration in growth could lie ahead and the Chinese currency is likely to weaken moderately against the dollar.

“Our forecast assumes no further falls in commodity prices and stabilization in the recent levels of financial stress. If stress builds further then there is a large risk that growth will not rebound, through its effect on consumer and business sentiment, when monetary policy easing in the developed economies will quickly come back on to the agenda.”

menu
menu