Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

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

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 or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Biotech Growth: we will ride out this storm

Biotech Growth: we will ride out this storm

Geoffrey Hsu of Biotech Growth Trust says the sell-off in biotechnology stocks represents a buying opportunity for long-term investors.

Play Sector Spotlight: Kleinwort Benson's Choukeir on UK equities

Sector Spotlight: Kleinwort Benson's Choukeir on UK equities

In our first Sector Spotlight of the year we explore UK equities on the back of the extreme market turbulence in 2016.

Play Picton: the UK property hotspots for rental income

Picton: the UK property hotspots for rental income

Picton Property Income CEO Michael Morris reveals how he is planning to ride the ‘ripple effect’ as UK economic growth spills out from the capital across the country.

Your Business: Cover Star Club

Profile: PortfolioMetrix is on a mission to kill 'Frankenstein' systems

Profile: PortfolioMetrix is on a mission to kill 'Frankenstein' systems

In a buyers’ market for off-the-peg discretionary management, self-funded start-ups begin at an inherent disadvantage

Wealth Manager on Twitter