A charge into bull market unlikely

13 May 2010
| By Benjamin Levy |

The world economy is unlikely to rebound to a bull market, with the share market likely to grind upwards while investors become worn out by its slow progress, according to the global equities portfolio manager at T. Rowe Price, Rob Gensler.

Speaking at a T. Rowe Price institutional briefing, Gensler said the slow return to higher values over the next three years would leave investors “feeling horrible and worn out”.

“The bear case can still happen, there is a 10 per cent to 15 per cent [chance of that], but there is even less chance of a bull market [emerging],” he said.

Gensler said the slow progress would be due to regulatory reform, the lack of robust demand from the Western economies, and the weight of capital coming out of less risky assets over a period of time.

Inflation in the developed world also would pose a risk to that recovery, he said.

However, Gensler warned that the emerging world still had a big problem controlling inflation, with most countries lacking the discipline to set inflation targets.

The “nominal growth” for the developed economies would be approximately 3 per cent to 5 per cent, but the real returns for investors would come from valuations going from reasonable to expensive, Gensler said.

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