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Wealth manager outlook: welcome to the 20mph recovery
by David Campbell on Sep 26, 2013 at 14:00
Wealth managers remain almost evenly split on whether developed economies are approaching – to quote Bank of England governor Mark Carney – escape velocity from the problems of the last six years, with 55% in agreement to 45% against.
As PMIs hit record highs in the UK, multi-year highs in the US and with Germany leading Europe out of recession, a substantial minority of managers surveyed for Wealth Manager’s Q4 Outlook remain to be convinced the developed world has shrugged off an extended period of subpar growth.
Even those in agreement with the principle were eager to emphasise that in this context, escape velocity meant only leaving something behind, rather than any sense of rocket-like momentum.
‘Escape velocity is only 20mph not 90mph,’ noted Jonathan Bell, chief investment officer at Stanhope Capital.
Richard Scott, chief investment officer at Hawksmoor, agreed: ‘For the moment [yes], but they may not escape very far – certainly not into orbit.’
‘We are probably judging economic growth by the wrong scale,’ said Jon Beckett, senior manager for fund assessment at Lloyds. ‘We keep looking for large jumps to evidence we are out of the worst but when you have high debt-to-GDP, then even humble single digit growth is “escape velocity”.
‘Western economies are at about as good as they’ll get in this current cycle – indicators are lagged but largely consumer rather than production-driven. I’d love to be proven wrong but structurally, economies are far from fixed.’
With markets globally repricing aggressively downwards versus the dollar, a mini credit-crunch in Beijing and a violent reversal of capital flows away from emerging markets all in the previous three months, wealth managers were also unanimous that developed world expansion would not be enough to make up for the developing world slowdown.
Almost four out of five managers (79%) said they expected global growth to fall over the coming 12 months, with 5.3% expecting it to fall ‘significantly’, a big change from Q3, when just 4.8% predicted a lower rate of growth and 57.1% predicted an increase.
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