Falling eurozone interest rates expected in latest Allianz Global Strategic Outlook

Eurozone interest rates should fall, while those in the UK, US and Japan are set to remain at record lows for the foreseeable future, according to the latest Global Strategic Outlook from Allianz Global Investors.

Commenting on the outlook, Andreas Utermann, global CIO, said: “We expect interest rates in the eurozone to start to come down further, whilst rates in emerging markets are likely to continue on a downward trajectory. In the US, the UK and Japan, we expect the policy of extremely-low interest rates to continue in the foreseeable future. In Europe, we remain cautious on sovereign bonds at current yields. Even if nominal return may turn out to be positive, we expect real – i.e. inflation-adjusted – returns to be disappointing.”

“The headwinds, which drove the reversal in stock prices in 2011, are likely to stay with us, at least in part, in the coming months, and could continue to weigh on equities in 2012. In particular, we expect markets will continue to price in the continuation of the debt crisis for longer still.”

“A lasting rebound in equity markets can only take place if a credible solution to the European Monetary Union debt crisis is nearing and/or economic data point toward a stabilization in economic activity. With economic activity slowing down globally and moderate equity returns, investors should look at stocks with relatively high dividends and pay-out ratios as dividend payments should offer some protection in the current environment. Regionally, we currently prefer US to European equities.”

“Our positive view on emerging markets leads us to a strategically positive view on the emerging markets assets, be they equities, bonds or currencies, valuations notwithstanding.”

“In conclusion, investors didn’t like the environment in 2011 and won’t like 2012 either. We expect bouts of risk aversion followed by increases in risk appetite, all against a backdrop of relatively low growth and great political uncertainties in all regions such as the US election, eurozone fiscal-consolidation ratification concerns, and geopolitical risks in Iran, North Korea or North Africa. Countercyclical and long-term-oriented investment behaviour will be imperative for market participants.”

To read the full report click here: http://www.allianzglobalinvestors.de/docs-produkte/global/popup/flip/index.html#/1/


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