Societe Generale sees bright outlook for developed markets
Although global momentum has eased, DM economies benefit from a brighter outlook than their EM counterparts, SG Private Banking says.
Growth is not buoyant, but leading indicators point upward, underpinning market confidence, SG report said.
According to the research, downside risks remain but monetary policy will keep a dovish stance providing some potential backstop whereas fiscal policy is on a tightening mode. As markets anticipate the end of QE3, US long term yields have picked up triggering a short-lived sell-off on most markets.
Overall, markets are buying the US recovery story and the Japan economic revival but still looks concerned by the eurozone slump. SG also highlighted.
Looking at the US market, SG said that the economy is going at slow pace towards the end of QE3.
“The biggest game changer is the new time horizon given by the shift in Fed communication that signals the end of QE when job market has significantly improved ie. when unemployment rate comes down to 7%.
“Depending on the pace of job creation, this level could be hit before mid-2014. Yet, ending the QE3 does not mean entering a tightening cycle. There is still a long way to go before inflation returns warranting a policy rate hike,” the research also said.
In Japan, an aggressive policy mix fosters an economic revival, SG Private Banking also said.
“Japan is the true 2013 outsider. The combination of a dramatic
monetary policy easing supplemented by a big fiscal stimulus
package has jump started the Japanese economy (GDP growth
revised up to +4.1%YoY in Q1).”
Click here to read full research: [asset_library_tag 6909,Societe Generale Private Banking Investment Strategy]