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
Brewin's Gutteridge: Yuan direction

Brewin's Gutteridge: Yuan direction

This week Brewin Dolphin's research head chats to Fidelity Asian Investment Directors Jenny Lee and Gary Monaghan about the big changes in China.

Play On the Road Challenge: horsing around on the polo pitch

On the Road Challenge: horsing around on the polo pitch

Libby Ashby takes to the polo pitch with Stuart Leigh-Davies from Redmayne-Bentley for an 'On the Road' challenge.

Brewin's Gutteridge: where Miton's Godber sees value

Brewin's Gutteridge: where Miton's Godber sees value

This week Brewin Dolphin's research head talks to George Godber, co-lead fund manager of the Miton UK Value Opportunities fund, about value investing.

Your Business: Cover Star Club

Profile: what tempted Brewin's Glasgow team over to Rathbones?

Profile: what tempted Brewin's Glasgow team over to Rathbones?

Rathbones’ Glasgow office has only been open for three months but the team, led by Angus Kerr, has already attracted new clients

Wealth Manager on Twitter