Twitter icon Email alerts icon Latest News RSS icon Magazine icon Stay connected:

View the article online at http://citywire.co.uk/wealth-manager/article/a635819

Invesco’s Greenwood: fiscal cliff will (only) wipe 1.5% off US growth

by Emma Dunkley on Nov 20, 2012 at 13:49

Invesco’s Greenwood: fiscal cliff will (only) wipe 1.5% off US growth

Invesco Perpetual’s John Greenwood believes the US fiscal cliff will only wipe off up to 1.5% of economic growth, rather than the full 4% being forecast.

The firm’s chief economist said the automatic tax increases and spending cuts set to come in at the start of next year amount to $615 billion or nearly 4% of GDP, which would be a ‘serious hit to growth’ in 2013.

However, Greenwood said Barack Obama and the opposition have had constructive discussions and that they will likely come to an agreement which will mitigate the economic impact of the fiscal cliff.

‘I think they will reach agreement but not on the full extent of it – so I see a fiscal cliff reduced to 1-1.5% of GDP,’ said Greenwood. ‘There are good prospects of an agreement but still some tightening of fiscal policy going forward.’

He said Obama’s re-election will not have much of an impact in monetary terms, as Ben Bernanke will continue at the helm of the Fed, whereas Romney had proposed to depose him.

‘That won’t happen, Bernanke will continue until 2014,’ said Greenwood. ‘The Fed is set on quantitative easing for the foreseeable future.

‘On the Fiscal side… under Obama we will continue to have budget deficits for the foreseeable future and are not going to have drastic austerity any time soon.’

Invesco’s chief investment officer Nick Mustoe added that Obama’s re-election is pretty neutral overall. ‘The key thing and the broader issue is what’s happening within the US economy, so it’s not just fiscal,’ said Mustoe.

‘There’s an obvious improvement in the housing market and a real bonanza from oil and gas. We should keep a balanced picture of what’s driving corporate earnings at the moment.’

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Sponsored Video: Bringing it all back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

Investing for income in a changing environment


With talk on interest rates on the horizon, our latest roundtable debate covers income investing against a changing backdrop

More about this:

Look up the shares

Archive

On the road

Click here to find out more from the Audience Development team.

Sorry, this link is not
quite ready yet